We went essentially nowhere last week, so mostly everything we wrote about last week still stands. We are in the Dog Days of August, and this type of trading is to be expected. We saw the breakout from the tight range, but as we noted, the bulls could not get very far. This could still easily be a final flag formation. This pattern would end the month long leg up, and bears can finally get a turn. Bears are likely to retest and then break back into the July range within a week or so. However, the longer the market stays neutral bulls could eventually gain some room to run.
We are approaching 220 on SPY. Normally, the market never breaks and holds these even levels, without at least a decent 2-3% pullback. Fund managers are still very overbought.
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 have been in the dog days of summer trading for the last month. Things will begin to pick up again as August comes to a close.
The pullback we spoke about in the short term, will eventually be bought so currently, 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 Market Outlook (Updated 4/17/16).
This week we have the Fed minutes as always the tone will be heavily scrutinized.
Trend Following Models:
My long term models are Bullish.
My medium term models are Bullish but turning Bearish.
My short term models are Bullish.