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The clock is ticking on a move to new highs

Precedent has it that a bull market normally ends after a period of slowing momentum, or internal strength. This period of slowing momentum sees the blue-chip averages (Dow Jones Industrials and S&P 500) move higher as the average stock begins to decline.

The time between a momentum peak and a peak in the averages varies from one bull market to the next. Most have been between four months and a year. In the current bull, this divergence between the averages and the average stock peaked several months ago.

The clock is ticking.

The view here is that the blue-chip averages have at least one more new high ahead of them before putting in a bull market top. In other words, the recent high in the averages was not the high.

Seeing as how a divergence between the S&P 500 and the small-stock Russell 2000 began several months ago, this would be giving the market the benefit of the doubt. Tilting things in the market's favor: Monetary policy is accommodative, and the domestic economy does not appear to be in danger of slipping into recession.

It usually takes at least a few hikes of the federal funds rate to do in a bull. There have been none so far. Given that the funds rate is virtually at zero, i.e. any rate-hike phase would be starting from as low of a base as is possible, this time around it might potentially take more than a few raises to correlate with a top.

It is important to recognize that no one knows what will happen in the future. The above view is just that, a view based on fact and historical precedent, not personal opinion or prediction. It is a long-term view that should have no bearing on the strategy of an intermediate-term speculator trafficking in growth stocks.

The speculator should instead be studying the price-volume behavior of the major averages and the action of the leading stocks. These are the only two indicators that one needs...