Looks Like Distribution

Last Friday continued the uptrend, putting the major averages back very near their highs from last year.  The Russell 2000 and the Value Line Geometric Average remain well below their previous highs.  I have posted a chart in "Chart Of The Week" that shows the relationship between low grade bonds and high grade bonds since the year 2000.  This chart shows that risk is still being avoided by bond investors.  In order for the stock market to move higher, attitudes toward risk must change.  Last week showed more deterioration in my valuation indicator and it is now as bearish as it was in the fall of 2015 before a sharp short-term decline.  Earnings estimates remain in a modest uptrend but there is some evidence that estimates may be peaking unless the outlook given during second quarter earnings reports is better than expected.  Sentiment remains neutral but, just looking at Friday, small investors and speculators turned much more bullish.  I remain in a hedged position and would think that new highs in the major averages would present an excellent selling opportunity.