Technical Analysis: Market Transitioning from a Cow to a Tiger - Brean Capital (SPY)

November 28, 2016 11:59 AM EST

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In its weekly technical perspective report, Brean Capital made an argument towards a change in narrative. Brean believes that the market is changing from a policy driven bull market to a growth driven bull market (i.e. a herbivore driven market (Fed) to a carnivore driver market (Tiger)), and that we must not discount improved growth. If improved growth is discounted, then growth needs to materialize or investors are going to be disappointed. Collective disappointment will mean more volatility.

Brean Capital technician Frank Longman commented in his report, "I'm bullish too; I just feel like comprehension of the bullish construct with which we're dealing could stand to be a little higher."

Longman continued, "I've long thought that there was a good chance that the baton pass from policy driven bull to growth driven bull would be accompanied by at least a rise in volatility and quite possibly a major volatility event. As policy normalizes, so should volatility. That we're seeing the market discount higher growth expectations sets the stage for that volatility."

Brean believes that the evidence at hand shows investors should be bullish in the intermediate term and respect the overbought condition in the short term. The most likely looking wave count is that the market is in"1 of 3 of 5" up. That would make the next pullback swing low the last great dip buy of this bull market.

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