The Medium-Term Trend

After looking at the chart below, it is hard to believe that I have the medium-term trend of the US stock market listed as an uptrend. However, I think you know the story...

The NDX, SPX and Small Caps are trading above their 50-day moving averages, while the Dow Industrials, Dow Transports and NYSE are trading below their 200-day moving averages.

It's two markets, however the balance is tipped toward the bulls because breadth continues to look healthy as shown below.

Don't be too bullish though. The global indexes are looking really bad.

In the chart below, the World Index, ex-USA, is the top panel. It is a very weak chart, and it is threatening to break below the 400-day average. A break under the 400-day is bear market territory, in my opinion.

The Dow Jones World Index, which includes the USA, is the middle panel. It is stronger, but has broken the 200-day. A break under the 200-day probably isn't a bear market, but it is hard to imagine a recent break below the 200-day as occurring in a medium-term uptrend.

The SPX Index, obviously USA-only, is in the bottom panel. The chart pattern looks decent, particularly because it is above the 200-day. But the pattern is so similar to the two indexes above it. A peak in January, a big drop, and then sideways movement.

Looking at these three indexes, it just seems likely to me that the SPX is going to follow the lead set the by the global indexes, and will soon drop below the support of the 200-day.

Let's not make any predictions, though. I am going to be patient and let the markets tell their own story.

The two charts below will help monitor the US market. A break of the uptrend lines and the horizontal support will be the first signals that the US is joining the rest of the world in a downtrend.

Commodities, Currencies

What is this spreadsheet telling us?

First, the US Dollar is quite strong compared to other currencies. This means the majority of holdings should be in US stocks rather than foreign, and it works against commodity related stocks.

Second, the Industrial Metals, such as copper, are very weak while Energy remains strong. Weak metals is consistent with a strong dollar, and means staying away from the Materials sector. I think it also puts a question mark over investments in Energy because it isn't right for commodities to be weak in general while energy is strong.

Most aging bull markets are undermined by a whiff of inflation led by Energy. The response to higher oil prices is usually higher short-term rates, but with lower long-term rates... exactly what we are seeing now.

As a result, the yield curve inverts, the economy and earnings start to struggle, and the stock market gets wobbly.

Industrial Metals are not looking good.

Outlook Summary:

• The long-term outlook is cautious. 
• The medium-term trend is up as of May-10. 
• The short-term trend is down as of Jun-19. 
• The medium-term trend for bond prices is up as of Jun-19 (yields lower, prices higher).

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.