“Time To Dump U.S. Stocks?”

This week the cover of Barron’s had as one of its headlines “Time To Dump Stocks?”

This should not be ignored.

Having been an avid Barron’s reader for 3 decades, I would describe such headlines as…
…not usually very timely,
…frequently correct,
…and usually a good indication of institutional sentiment.

With that in mind, consider the fact that SPY, DIA and QQQ are all sitting on or near their 50-day moving averages, while the IWM is sitting just below its 200-day moving average.

In short, every major index is at an inflection point that institutions tend to respect as good areas to dump or buy stocks.

Last week’s market action suggested that Wall Street was more focused on vacation than the stock market, but I’d be willing to bet that many big traders are looking towards September with the same question as Barron’s on the top of their mind.

Last week the U.S. stock indexes closed higher on a weekly basis, however, it felt more like they simply drifted sideways because that was the action for the last three days.

In fact, the SPY did not trade outside of its Tuesday range.

The major averages are coiling up like a spring, and under the surface there are some very interesting crosscurrents.

There are several areas of “cross currents” that make last week’s sleepy market one that should not be ignored.

In this week’s Market Outlook video I review the longer term trends that highlight the current risks, and reasons for bullishness in U.S. equities. One of the important observations in that commentary is the current steady correlation of stocks to bonds.

If you look at the trends of August, it is clear that as stocks have drifted lower, bonds have drifted higher. This is a reiteration of a finer point that this commentary began with last week.

The suggestion here is one of a clear indication of a move to safety, or ‘Risk Off’ mentality. Our Big View gauge of this has been flashing this warning for weeks and it’s still very much in place.