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The bears must have took the 4th of July off as the Bulls were large and in charge last week. Just as the S&P 500 looked like it was going to continue lower, the bulls decided to halt price and reverse it higher. The S&P 500 didn’t break out higher beyond the larger trading range, but it did create a strong buy signal and breakout from the prior week. It is now in a good position, if the bulls can hold on, to break the trading range to the upside this week if it is a strong week.
The Bear ‘o’ Meter budged a little higher with bull market force due to some fundamental factors. The S&P 500 has been trading sideways since January and been able to keep it’s relative bullish stance. The fundamentals look fine and US Small Cap are basically on highs. The question still remains…will the remainder of the market follow the leaders higher, or will the lagging equities break the market? Right now, the leaders are winning. Below is a look at the Bear ‘o’ Meter.
The swing indexes we like are the following: Extended Treasury / Australia / EAFE Value / Global Wind Energy / Healthcare Sector / Transportation / Natural Gas
All the swings had a bullish week…even Extended Treasuries. They all triggered buy signals or continuation patterns. This is all bullish price action. The weaker indexes made it down close to support, but did not break support causing any stops to trigger. We want to see if the bulls can keep pressure this week. If they can’t, it will show weakness and we could see more negative action in the weeks to come.
We have a lot of possible action this week. Given all the buy signals, we could have some buys triggered. First comes the signal…then comes the trigger with another advance in price. We have two possible second purchases. The MSCI EAFE Value Index and Global Wind Energy are down in our second purchase ranges and both issued buy signals. We are not going to scale the full percentage in the MSCI EAFE Value Index because the US markets are so much stronger, but we will add a little more if we get the trigger to lower the cost basis.
A possible new index is the US Aerospace and Defense Index. It is a possible double bottom and bull flag. If we get the trigger, we will certainly pick some up and see what happens. We would have a stop relatively close and a second purchase would not be baked into the equation.
The Education/Gratitude Book Club
This month’s book is “Do It Scared: Charge Forward With Confidence, Conquer Resistance, and Break Through Your Limitations,” by Scott Allan. It’s turning out to be a great read! Hope you had a great 4th!
Adam Straseske, CMT