Tuesday, August 4, 2015

The U.S. Stock Market: bullish complacency is definitely not recommended.....MORE PESKY FACTS!

The U.S. Stock Market: bullish complacency is definitely not recommended

For the short term, global stock prices remain choppy and erratic, with rapid and violent twists and turns, creating a high-risk environment for investors and traders. Longer term, bullish momentum has been deteriorating (slowing) most of this year, which makes us question the longevity of the long bull market. Serious risks are rising for long-term investors. 

The prevailing general mood of bullish complacency is definitely not recommended.

The Dow Jones is down, and far more stocks have been declining than advancing. Market breadth has taken a turn for the worse, indicating that a much steeper correction may be in the cards.

Medium-term trends, covering several months, remain corrective for most of the major U.S. stock price indexes.

Long term, U.S. stock price index trends have been bullish for more than 6 years. Now, however, technical signs of significant major trend deterioration are accumulating, and the long uptrend is becoming increasingly questionable.

Defensive stock sectors generally remain stronger than Cyclical sectors, with Consumer Discretionary and Consumer Staples performing especially well. Utilities have turned relatively strong since 6/25/15. Health Care, which has been an upside leader for many months, suffered a sharp drop a week ago, however, indicating that even the established winners are vulnerable when an important component stock (Biogen, BIIB) reports disappointing earnings. In such a volatile trading environment, using protective stop-loss orders makes sense. Be especially cautious ahead of earnings reports.

The Cyclical sectors, Energy, Materials, and Industrial, are extremely weak and should continue to be avoided or sold. 

The Financial sector has turned relatively weak since 7/22/15, and Technology has turned relatively weak since 5/27/15.

Foreign stocks (especially BRICs and emerging markets), commodities (especially oil and metals), and commodity-related stocks remain extremely vulnerable and should continue to be avoided or sold.

U.S. Treasury Bonds have turned upward as investors fled to safety, and the short-term trend appears to have further upside potential driving rates higher.

The warm security blanket of the Fed's easy money is evaporating and we will all see the destructive consequences of their corrupt policies soon.

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