Last week was an outstanding week that signals the change of trend. We are now officially in a intermediate term bull-market here, and I think this rally has much farther to go. The reasons are as followings:
1. Benign inflation data last week, including flat core CPI for April, came in market friendly.
2. The possibility of end of the long cycle of Fed rate hikes. The market tends to look about six months ahead.
3. The market is down year-to-date, while earnings growth is strong. Rising earnings and falling prices have conspired to create some excellent values.
4. This rally, which began on April 29, has new leadership -- tech and growth stocks. The NASDAQ, a proxy for tech and growth, had been under-performing for most of the year, but now, since April 29, it is consistently outperforming both the Dow and the S&P.
On the other hand, some pullback after last week's big gains would be neither surprising nor worrisome. After all, stocks do not usually go straight up. Remember, the trend at this time is clearly up.
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