Stock Market Analysis

Monday, August 07, 2017

US Market Still On Track For Intermediate Correction...


Welcome to the second week of August!

Last week was truly one incredible one not only in terms of stock market performance but also in terms of economic data performance!

In terms of stock market performance, even though the S&P500, which is the broadest measure of the US stock market of the 3 major indices, did continue largely sideways as I have predicted, the Dow has continued to defy gravity and made 9 straight positive days on its own, breaking the 22,000 points level.

In terms of economic data, last week's ISM index and Jobs Report, the two main heavyweight economic indicators of each month, beat all expectations just like how economic data seems to have been doing since Trump took office. Yes, ever since Trump took office, economic data has tended to surprise to upside, leading to the persistent rally that we have experienced so far.

So, am I wrong that this is where the market might pullback? Should we chase after this bunny?

Not quite yet.

The S&P500 and the Nasdaq are both quite on track, moving largely sideways with strong bearish inclinations and that continued to support my intermediate bearish outlook. Even though the Dow continued to behave as the runaway horse here, it is actually stacking up more and more reasons to be bearish on it. On top of the reasons I have qouted to paid subscribers last week, here are 3 more for this week (wish to be on the paid subscriber email list? Subscribe by hitting the yellow button on the right below my profile photo) . First of all, it making 9 straight positive days. Whenever the Dow makes that many positive days in a row, it tended to pull back within the next week or so. Secondly, volume has been steadily declining while the Dow climbed higher, that is a very strong bearish reversal signal especially when occurring around psychological levels like the 22K level and multiple day rallies. Thirdly, big levels like the 21K and 22K level just don't give in without a fight. When the Dow first broke the 21K level back in March, it did so with grandeur before collapsing straight into an intermediate pullback, the kind of sideways extended bearish inclined pullback that I am expecting this time round too. Even though the Dow didn't quite go downwards at the 20K level, it did struggle along that line sideways for about 2 months before it gather enough energy for a real breakout.

All in all, I am saying the market is still in line for that intermediate pullback that I have spoke of over the past 2 weeks and therefore, this is not the time to be newly long. In fact, my Master's Stock Options Picks subscribers and I exited yet another one of our call options positions last week and luckily in a positive way.

For now, the market remains in short term neutral trend within an intermediate and primary bull trend.

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