Special Bulletin: August 10, 2024

Where do we go from Here?

The stock market is in the middle of a new rally attempt and is waiting for an official “follow through day” (FTD) to confirm the new rally. Long time readers of this post know that not all FTD’s work. In other words, just because a FTD happens and confirms the new rally attempt, it does not automatically mean that it will spawn a meaningful bull market but only that the conditions for one have improved.

The rule is that FTD’s confirm new rallies on day 4 or later of the new attempt. Monday will be day 5. However, if a rally is confirmed by a “follow-thru day” this coming week, investors/traders must keep an eye on the first 3 days after the FTD for professional selling, known as a Distribution Day (DD). Typically, when a DD happens within the first 3 days after a FTD, the rally attempt usually fizzles out and often suggests lower prices lie ahead. But focus on “often,” it is not always. Investors benefit by being flexible in times like these and not just “plant their flag.” The market is ultimately going to do what it is going to do – and risk management rules are not accurate 100% of the time. No disciplined system is.

A great deal of important inflation news is coming Tuesday through Thursday – potentially market moving news. So, the week ahead is an ideal week for a signal change (bullish) as well as a “fake-out” that leads to an “about face” reversal (negative). The stock market will decide “where we go from here.” It is our job to study the daily technical internals and stay on the right side of its decision.

Our Current Market Outlook was downgraded to “Market in a Correction” with a red light as of 11:00am on 08/01/24 with the SPX @ 5,487.80) and that signal remains in effect as of Friday’s close. Our Core Four has 1 yellow and 3 red lights, with a VIX that is well above its 50-day mav and testing its 21-day. 

Last week’s 4-day recovery from Monday’s shellacking was on weak volume and looks like a wedging pattern (weak). Those usually get resolved with another move lower in what is commonly referred to as a “low, rally, retest” sequence. The S&P500’s 21-day mav lies just above current levels and will likely prove to be a source of overhead supply in the immediate future.

“Jesus said to him, “I am the way, and the truth, and the life; no one comes to the Father but through Me.”

“If you love Me, you will keep My commandments.”  John 14:6 & 15 NASB 1995

Game plan: I love trains. In railroading, one of the safety motto’s is “Stop! Look & listen.” Investors need to heed that same warning or get hit by the next bear express. Be patient with new entries and wait for confirming strength. Sit on the cash you may have recently raised and build your watchlist. Ask the Lord Jesus for wisdom. Pray for the peace of Jerusalem (Psalm 122:6-7). May they prosper who love her.

Note: You can learn more about The Triumphant Core Four risk management system by clicking here.

Have a Triumphant day! ®