Special Bulletin: Aug 3, 2022

The Dog Days of Summer 

With the summer heat exciting the outdoor crowd by providing for tans and a demand for pools, the stock market is acting more like a slow moving dog looking for relief in the form of shade. After having just experienced the “worst first six months” start to a year ever for the Nasdaq, a relief seeking rally was to be expected. How long will it last? We don’t know, but as of today’s close, our Current Market Outlook has been downgraded to “Uptrend Under Pressure” with a yellow light based on the “math of the market.” (S&P 500 @ 4155.17)

The Fed’s interest rate hikes remain a serious headwind for growth, yet underlying technical conditions have improved somewhat. Even with growth stocks and the major stock indexes experiencing a “bounce” recently, the general stock market still faces higher than normal risks.

Throughout stock market history, many of the greatest rallies have happened during a recession/bear market. They are often short-lived. As this rally develops, keep an eye on the time component – the more time that passes before another move down the better it is for the stocks. Bear in mind the economy is still in a difficult economic environment – and stock returns will continue to be “data dependent.” 

Our “Core Four” (see top of page) has slipped to 1 green and 3 yellow, moving to a yellow condition. Be prepared to act defensively if conditions deteriorate quickly.

Finally, the stock market is lacking significant leadership and good chart “set-ups” in growth stocks. A period of sideways movement in the indexes would go a long way in remedying that problem. “Bad news” continues to be absorbed for the most part, which reflects an improved underlying bid for stocks. But not a voracious appetite yet.

Game plan: Allow true leadership to emerge, and stay patient and nimble. Focus on the 50-day moving averages of the S&P 500 and the Nasdaq as a key tell during any future pullbacks. Be leery of September & October.

Have a Triumphant day! ®