Early weakness failed to hold by Thursday’s close, though still another day of negative market breadth.
Until/unless this is recouped right away, it’s proper to expect that at least a minor pullback might be right around the corner.
However, we have not seen any evidence, just yet, that this is in place, and one should still play for gains into end of week/early next week.
For now, the following remain pressing concerns heading into the weekend / next week:
1) Low Equity Put/call ratio- This has fallen to near .40
2) Percentage of stocks hitting new 20-day highs has fallen to single digits
3) Stocks above their 200-day moving average is just 27%
4) “All stocks” Advance Decline is not back at new all-time highs
5) Yields have broken support as of Thursday’s trading (Bearish for Financials)
6) Leading sectors like Transports are well off early June peaks
7) Demark indicators will show alignment into next week for QQQ and the majority of large cap Tech which has provided us with all our outperformance
8) Overconcentration of “The Big Five” remains an issue to market health
9) Signs of Small-caps breaking ratios vs SPX are a concern
Despite these negatives, we’ve still seen precious evidence of Defensives roaring back. Last week did show some minor outperformance in the Utes, but this week that has been given back completely and REITS are also weak.
Seasonality remains bullish for July and even 7/9 AAII numbers showed more Bears than Bulls by more than 16% Finally the fact that the Largest Tech stocks are still dominating might be a larger concern, but near-term, none of these stocks has stalled out and all remain stellar in good uptrends with no signs of weakness.
Thus, until they breakdown, it seems foolish to make any sort of bearish market bet. More charts and thoughts below.
Chart Spotlight: S&P 500 Index
Late day recovery and lack of weakness still can allow for further upside near-term. It’s thought that a push up to 3200 might happen before a stalling out next week.
Key Macro Points:
1) This remains a bear market bounce, NOT the start of a new bull market
2) Any stalling out and/or pullback likely will prove short-lived & give way to rallies into mid-July/August given the extent of positive momentum.
3) Increasingly it looks likely that SPX and/or DJIA could push back to new all-time highs, but would still represent a good opportunity to sell gains.
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Twitter: @MarkNewtonCMT
Author has positions in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.
