I am feeling fairly negative about stocks at the moment, so I need to step back and see what is in the charts. However, the words aren't coming to me this morning, so I am just going to do a quick run down of the charts.

Is it a bearish top, or a bullish sideways consolidation? So far, all we know for sure is that it is a broken trendline which is a signal for caution, but it doesn't mean stocks are headed significantly lower.

The key to this chart is the neckline. A break below the neckline would kick up the caution signal for the broader market because, in my opinion, the Semiconductors are the leaders of this market both up and down.

The SPX is challenging its all time highs, while at the same time the number of participating stocks in the general market is weak. That's not a good set up.

Here is another look at the same thing. The January peak had healthy participation, but the July peak has poor participation.

If you just look at the middle panel, it is hard to spot a problem with the stock market. It looks like a steady climb from the lower left to the upper right, bullish. But the top and botton panels are showing some problems, particularly the top panel. 

The ECRI index is pointing to an economic slowdown over the next four months. Unless we see a quick reversal of this index, such as in the fall of 2017, then I think we see weak economic growth and a struggling stock market heading into the remainder of the year.

Maybe it is a mistake to overthink the stock market. A time saver would be to loosely follow the weekly stochastic. 

Perhaps, add to positions at the stochastic lows, and lighten up at the highs, and maybe use the moving averages to help make the decisions.

Based on this chart alone, I would consider lightening up on positions. 

This is one of the charts that I like use to help me know when to move into cash. A break below the 200-day for the Dow combined with the diffusion index below the zero-level is a strong signal that there are problems in the market.

Would you consider this a break down, or does it have to break below the lows of 2016?

Bottom line: The August through November time period could be rough for stocks, but it is too soon to be too bearish.

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 down as of Jul 27.  

The medium-term trend for bond prices is down as of Jul 23 (prices lower, yields 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.