Stocks kicked off the new year on a solid note, posting slight gains on Friday that built on last year’s strong performance. But Ned Davis, founder of Ned Davis Research, thinks investors should tread carefully. Davis noted his firm’s Big Mo Multi-Cap Tape Composite, a gauge of overall market momentum, sits at 66.36 — well below last year’s peak above 80. “Big Mo Tape is still on buy signal from May 2, 2025. But the cyclical/secular trend is extended,” Davis said in a note to clients. Should momentum wane further, it could trigger a sell signal. .SPX 1Y mountain SPX 1-yr chart There are other potential sell indicators investors should watch out for, Davis noted, including margin debt. S & P 500 margin debt exceeded $1.2 trillion as of the end of November, and the 15-month rate of change in margin debt has entered “excessive speculation” territory, he said. To be sure, “one of the indicators featured today are on sell signals, the trend is up, and we are mildly overweight stocks,” he said. “Yet, this looks to be a mature bull market, and so, … I want to be prepared should things turn down.” Investors also have to consider escalating geopolitical tensions. Over the weekend, the U.S. ousted Venezuelan leader Nicolas Maduro in Caracas. Stocks remained steady on Monday, another sign of the market’s resiliency. But should worries escalate, it could put a dent in equities.
