I think we have a new short-term uptrend, although it seems fairly weak.
The SPX equal-weight closed above the 5-day, and the number of new 52-week lows dropped way down into the harmless range.
It is a qualified uptrend, though, because it is probably within a sideways range meaning that the uptrend will soon find resistance at the top of the range.
Because I am not expecting much from this uptrend, I probably won’t make any changes to my accounts.
Sentiment
The Investor’s Intelligence Newsletter Writers Sentiment Survey came in at about 49% bulls this week, down from about 55%. From a contrarian point-of-view, this is a nice improvement but it is still a bit bullish, and isn’t yet presenting us with the wash out in bullishness that comes with a significant market correction.
The chart below shows a momentum indicator of the inverted 10-day put/call ratio (to create a call/put ratio), and it overlays the SPX. This chart shows that, on a short-term basis, we are in a buy range for stocks.
Outlook Summary:
I am expecting a choppy, headline-driven, sideways market between now and the November elections. I still plan to buy the dips for short-term gain, but over time I plan to continue to reduce my overall exposure to stocks.
The expected US economic growth rate is back down to the 2% level.
Higher rates are now a headwind for US stocks. The recent tax cut, the 300 billion spending increase, and the already out-of-control federal deficit are a set up for a very dangerous spike in interest rates.
Once again, the problems in Europe related to debt and the banking system are serious issues.
Something else to consider is the Mueller investigation. I worry that the headlines generated by the investigation may rattle the markets more than people are currently anticipating.
Based on market seasonality, Mike Burk is projecting a medium-term stock market peak in May which sounds about right to me.
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