A late afternoon selling hiccup just before the final hour was just about all the excitement for the day. Early morning selling kicked us off and it too found support, but with volume so low it really cannot be chalked up to institutions rushing in to support stocks. The S&P 500 at the last minute saw enough buying for the index to close at another all-time high. The Dow Jones Industrial average was the only other major index to close in the green today. Small caps led all decliners, but this isn’t a surprise as the index has been a laggard. We still do not have distribution and breakdowns necessary to switch our Market Model into neutral or even sell mode. It is prudent to obey your exit strategy and hedging strategy. We still remain in an uptrend, but as of now it appears as if in the short-term it has run out of steam.
The 10 year United States Treasury note hit a new yearly low today as yields continue to move to the downside. Contrary to what the Federal Reserve is indicating it appears investors continue to push money into Bonds. Yields continue to hit new lows and prices at new highs why fight this trend. TLT has been in a solid trend higher since February of this year despite what the experts have been saying. We still have ZIRP and a little bit left of QE should keep the Stock Market afloat for a little while. Nothing is certain and it is precisely why we use a time-tested process to identifying potential big trend changes in the market. On the TLT chart you can clearly see the trend change staring at the beginning of this year and remains in an uptrend.
How we move from here is anyone’s best guess. Tomorrow we get another read on second quarter GDP with expectations of the revisions at 3.9%. Perhaps 3.9% is lofty, but if the number is 3.5% is that a big revision down? Would the market rally on that news? Trying to figure this out is simply meaningless. In the short-term we are overbought and a small 1-3% correction can happen at any time. This does not mean we go into an outright bear market collapse like a few pundits claim. Short-term indications like the % of stocks above their 20 day is above 75% where the market will typically consolidate. Stick with your process and stop trying to figure out what tomorrow might be. You only know what has happened and you should react to fact rather than emotion. Hoping something will work out usually does not end in the desired outcome.
Tomorrow is a new day, but perhaps GDP will spice things up. In the meantime, there is only a few days left of summer and that means only a few days left to get 20% off a subscription. If you have yet to sign up go here to sign up!
