MON Sector Strength - TUE Rates - WED Medium-Term - THU Commodities Currencies - FRI Sentiment - SAT Longer-Term

What is the short-term trend? None of the downturns seem to want to take hold as shown by this chart below of the SPX equal-weight. I sure don't see a downtrend in this chart. The market is in one of those relentless grinds that inch higher.

On the other hand, I don't see an uptrend, or even a grind higher in the chart below. The number of stocks on P&F buys continues to look weak which is a bit confusing considering that the chart above is the SPX equal-weight, and not the cap-weight.

I don't think I am going out on a limb by saying that I don't see evidence to suggest either a sell off or a surge higher.

So what to do? I think it is a judgment call and maybe we should just follow the leaders such as the Semiconductors. They have led this 10-year, low-interest-rate, technology-inspired bull market.

As you can see in the chart below, as the market grinds higher, the semiconductors have struggled a bit and are now below the 200-day after a gap down below the 50-day last week. This chart isn't that bad longer-term, but in the short-term if your strategy is to follow the leaders then this says to step aside.

The Longer-Term Outlook

Sticking with the theme of follow the leaders, the Momentum stocks are shown below and they have stalled at their highs for six months or so. But this chart shows a ton of longer-term potential, and a big blow out to the upside could be brewing.

Another judgment call? I am sticking with the idea that this market is near the top of its range until the midterm elections. If there is a blow out surge higher, then it won't come until November, and I think that time frame works just fine for a longer-term chart pattern like the one below.

The Semiconductors again? I am watching this neckline. Enough said.

Because I am leaning bearish, I want to ignore this chart that fully supports the bulls.

I like to invest in the direction of the junk bonds, and now this chart is pointing higher again much to my surprise. It could just be an upturn blip like we had in early 2015 just before the bottom fell out of the market in August 2015. This is another good chart to watch.

Regarding junk bonds, they are highly correlated with small caps. And small caps do well when the US Dollar is rising late in a bull cycle because they don't rely on exports. So it makes sense to see junk bonds doing well at the moment.

There is a lot of talk about the economy running on all cylinders. The SPX1500 affirms that view, but the ERCI index doesn't. The ECRI sees an economic slowdown coming in the months ahead, and, in addition, they point out that when the index is at these lows, the market is vulnerable to any economic shock.

Speaking of economic shocks, this is just my personal opinion... the trade war is not the big issue that could be the economic shock. I think the shock will be the poor-quality loans that were handed out due to years of zero interest rates around the globe. The shock will come as rates rise or the economy slows.

In addition, a further shock will be the irresponsible trillion-dollar-plus annual Federal budget deficits of the Republican-controlled US government. If the economy slows, these deficits will get so large that there will be no choice but to cut spending and raise taxes, and this will occur just when the economy needs stimulus. There I said it.

One more chart. The 50-day trend of new 52-week highs in blue, and the NYSE in red. This is not the look of a market ready to challenge its highs.

What is going on with this industry? A new 52-week low. Tariffs or economic slowdown?

Are these stocks now a bargain?

Nice! This is my kind of chart, but dividend-payers leading the market to new highs?

Outlook Summary:

The long-term outlook is cautious. The ECRI index points to an economic slowdown.
The medium-term trend is up as of May-10. Sentiment indicates caution.
The short-term trend is not sure as of Aug-18.

The medium-term trend for bond prices is up as of Aug-11 (prices higher, yields lower).

Investing Themes:

Technology

Medical Products

Cyber Security

Payment Processors

Small and Micro Caps 

Gaming 

Strategy:

• Buy large cap stocks and ETFs at the lows of the medium or short-term trends.
• Buy small cap growth stocks on breaks to new highs in the early stages of short-term up trends.
• Stop buying when the short-term trend is at the top of the range.
• Take partial profits when the uptrend starts to struggle at the highs.
• Never invest based on personal politics.