Special Bulletin: September 9, 2019

Technical “internals” have improved, but headline risk remains. 

The technical condition of the current stock market rally has improved to the point where our Current Market Outlook has been upgraded to “Market in an Uptrend” with a “green” light. Our “Core Four” internal indicators show all green signals. Net result: the uptrend is gaining traction.

While uncertainties regarding the China trade war and the next Fed interest rate decision continue to hang over the market, the bulls have begun to press their case and have driven stocks higher. Talk of a looming recession can still be heard, but is waning a bit. At least for now.

The math of the market, which began to spot this upturn a couple of weeks ago, continues to point to institutional accumulation of stocks. Today’s market action exhibited an interesting bifurcation, though. Financials, retail and energy stocks stormed ahead, while the tech sector (payment and software names in particular) came under intense professional selling. Was that simply rotation? Or was it a more troubling dumping of leading stocks? Investors need to watch this closely.

A bright spot from last weeks action was that the major indexes charged above, and held, their 50 day moving averages. Buyers swamped the sellers and up she went. In our last post we wrote… “We don’t expect our new C.M.O. signal to stay yellow for long. A strong move to either a green condition or back to red is likely by the middle to end of September.”  We were encouraged to see that strong move (up) begin the very next day.

For investors, things have improved and so have the opportunities to make money. What to do now? Watch the key indexes 50 day moving averages closely. The bulls have the ball and need to drive towards the end-zone without fumbling. If they punt and the 50 day MAV’s are pierced negatively with a large increase in selling volume (more Distribution), conditions could deteriorate quickly. An investor would be wise to have an exit strategy already prepared, just in case. But for now, the trend is again favorable. 

Have a Triumphant day! ®