Money Still Flowing, but Expect a Larger Pullback in August.

We spoke at the end of June that: “July would be the key” and we would see a large move. Indeed, we did, and the breakout was clearly to the upside.

Short-Term:

We finally had a down week last week, but we are still stuck in this tight range. We did see just shy of the 1% low to high pullback we were talking about but bears were not able to do much more. Bulls will likely try to break out of the range early this week but will not be able to get very far once again. Bears will then likely retest this range after any breakout.

We are approaching 220 on SPY, normally, the market never break and hold these even levels, without at least a decent 2-3% pullback. Also, another short term red flag is that: fund managers are currently way too bullish on the market.

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Medium-Term:

The entire world is still pumping money into the US market as it is seen as the last man standing. Some of my charts are acting the way they did when QE was active. So the current inflows from the rest of the world must be in the 10s of billions per week.

Once again, we are still not on sold Fundamentals, but the market moves on liquidity and there is still plenty of money on the sidelines. However, there are still plenty of red flags that will have to be sorted out such as: bonds continuing to make new highs, and oil being hammered for the second time this year. We also noted a spike in TED (Treasury Eurodollar spreads). Historically, this has only happened when there are underlying stresses in the market such back with the European debt crisis. This could take months to actually show up at the surface.

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The pullback we spoke about in the short term, will eventually be bought so being a bull is a safer bet. For the bears to get serious they need to first exceed the red exceed target around 213.

Long-Term:

Long-Term Market Outlook (Updated 4/17/16).

The Calendar:

This week all eyes will be on the Jobs Report. We are expecting too see a miss, but we do not gamble.

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Trend Following Models:

My long term models are Bullish.
My medium term models are Bullish.
My short term models are Bullish.

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