The fireworks started early on Maui as a huge fire well swept through Ma’alea forcing emergency personnel to completely knock out all communication networks island wide. Thankfully, today, Verizon’s 4G network is back up and we can get on with the weekend analysis. When it comes to the overall stock market what we just saw the past week was nothing short of a spectacular v-shaped recovery. The recovery is not complete yet but you have to admit what we saw the past three sessions has been very impressive consider the two day sell off following the Brexit.

I see that many traders are for sure that new highs are right around the corner. I also see a lot of traders that are 100% for sure we are going to top out here. Coming from an objective point of view, it is still very clearly obvious to me (explained in more detail in the video below) that we are still in nothing more than a big giant trading range between the 2015/2016 highs and lows. There are some positives right now and there are some negatives which is why I find it hard to lean either bullish or bearish here.

This is why our operational models are under an across the board NEUTRAL condition in all of the major market indexes. This being said, our operational model in the DJT/IYT remain under a SELL signal. Historically, the best uptrends occur when all of our models are under BUY conditions. Our other models are under a NEUTRAL signal because they are all trading above their 50 day moving averages and there are still leading stocks uptrending. While we are under this NEUTRAL signal we will take long positions but keep them smaller relative to what we would if under a BUY signal. That is how we are operating here.

So what are the bullish conditions? Simple. We quickly recovered most of the losses from the previous sell off with many stocks managing to hold key support levels and other stocks completely reversing their sell off to hit new highs. We have more stocks hitting new 52-week highs on the NYSE since 2010 and the NYSE ADV/DEC line is already hitting new highs ahead of price. This in and of itself should definitely be viewed as a bullish setup for the overall market. However, one index does not make an entire market.

The bear side of the case is that we have yet another lower volume v-shaped recovery right into resistance. Most chart patterns that are forming consolidation patterns need a lot more work before they create any kind of safe symmetrical pattern to start watching for breakouts. And even more problematic to me, shorter term, is that the markets that I watch to move in lockstep with the stock market to tell me when an uptrend is healthy are diverging quite noticeably. The bear side on the short term appears much more ominous compared to the current positive in this market so one can only assume new highs are coming sooner than later.

However, if we must be logical it seems highly unlikely with the market trading the way it is in this giant range during the seasonally lackluster summer months that a new high is going to materialize any time soon. Right now, defensive stocks left and right are hitting new highs and in turn this might help the market start to trend higher later on which would make for a great breakout around the more seasonally bullish periods of October to May. But until we get to the months of September and October, I think it would be very foolish to think in the short-term the market is going to breakout to new highs here based on the current crop of leadership and the overall structure of the market with the DJT/IYT still looking quite bearish.

For further in depth analysis on the overall market make sure to watch the video below. Have a great rest of your Fourth of July weekend everyone. Be safe and have fun. Aloha from Maui where half of the west side is burned to a crisp.

TOP CURRENT HOLDINGS – PERCENT RETURN SINCE SIGNAL DATE – DATE OF SIGNAL

CLR long – +141% – 2/11/16
GRAM long – +73% – 4/1/16
HBP long – +50% – 3/28/16
SIMO long – +39% – 3/11/16
EBIO long – +38% – 5/26/16
APLP long – +29% – 3/31/16
FCPT long – +26% – 2/29/16