While I view the market as effectively flat over the last several months, a number of indicators are hitting new 6 month lows for COB Friday: Dow Industrials, Dow Transportations (week of July 24), Copper, Gold, oil, and my several-week stock trend indicator. The several-month trend indicator is in bearish territory, but only slightly so and not for long enough to declare a negative forecast.
By my personal definition, a Dow Theory bearish signal has occurred, but that mainly tells us that the trend of the market is negative. We all know that. The 3-month T-bill broke out to 8 basis points on July 31. This is an increase but is not sufficient to raise any alarms, to me anyway. This, the above lows in commodities, and the negative movement in stocks seem consistent with the markets anticipating an increase in the Fed Funds rate in the fall.
Given the low inflation and the moderate growth in the economy and market anticipation of a Fed Funds interest rate increase, I would guess that any worry of significant stock declines is somewhere between premature and simply wrong. Any discounting of a mild negative situation seems to be occurring now. Something bigger should be necessary to drive stocks down significantly.
Or as Alfred E Neuman said, "What, me worry?"
Nevertheless, the markets are presenting a fairly coherent picture, so I thought that I would mention it.
Good luck,
Tex
Posted by: mrweyl@hotmail.com
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