MON Sector Strength – TUE Rates – WED Medium-Term – THU Commodities Currencies – FRI Sentiment – SAT Longer-Term
What is the short-term trend? None of the downturns seem to want to take hold as shown by this chart below of the SPX equal-weight. I sure don’t see a downtrend in this chart. The market is in one of those relentless grinds that inch higher.
On the other hand, I don’t see an uptrend, or even a grind higher in the chart below. The number of stocks on P&F buys continues to look weak which is a bit confusing considering that the chart above is the SPX equal-weight, and not the cap-weight.
I don’t think I am going out on a limb by saying that I don’t see evidence to suggest either a sell off or a surge higher.
So what to do? I think it is a judgment call and maybe we should just follow the leaders such as the Semiconductors. They have led this 10-year, low-interest-rate, technology-inspired bull market.
As you can see in the chart below, as the market grinds higher, the semiconductors have struggled a bit and are now below the 200-day after a gap down below the 50-day last week. This chart isn’t that bad longer-term, but in the short-term if your strategy is to follow the leaders then this says to step aside.
The Longer-Term Outlook
Sticking with the theme of follow the leaders, the Momentum stocks are shown below and they have stalled at their highs for six months or so. But this chart shows a ton of longer-term potential, and a big blow out to the upside could be brewing.
Another judgment call? I am sticking with the idea that this market is near the top of its range until the midterm elections. If there is a blow out surge higher, then it won’t come until November, and I think that time frame works just fine for a longer-term chart pattern like the one below.
The Semiconductors again? I am watching this neckline. Enough said.
Because I am leaning bearish, I want to ignore this chart that fully supports the bulls.
I like to invest in the direction of the junk bonds, and now this chart is pointing higher again much to my surprise. It could just be an upturn blip like we had in early 2015 just before the bottom fell out of the market in August 2015. This is another good chart to watch.
Regarding junk bonds, they are highly correlated with small caps. And small caps do well when the US Dollar is rising late in a bull cycle because they don’t rely on exports. So it makes sense to see junk bonds doing well at the moment.
