Weekly Report

Stochastics are coming down with the daily SPY in the low 30’s and QQQ in the same configuration.  Traders should be buying as things get into their preferred price targets and buy a daily stochastics recycle that seems close by here.  As long as IJR can hold the 111 area and XTN can hold 80 or so, this is another indication of a short-term bottom in equities.

The market finally came down on Friday, moving slightly below the SPY 656 we mentioned in the Midweek.  Realize SPY could break 650, as this would be typical expiration behavior.

Support areas on SPY are around 667 to 664, then 656.  % Bears Chart has just moved below 20%. Look at July of 2023, or even July 2020. These illustrate what happens when the chart just moves below 20%.

We continue to look for a decent advance into the end of the year.  The two main equal weight ETFs have staged an upside breakout.  It looks like the dollar has moved into a consolidation. This could last for another year or so but should resolve in some upside.

While we do not see another crash coming, recent articles on valuations being "permanently higher" is one factor suggesting 2026 might be a bit more difficult than 2025 has been. If XLF can break 50 it could test 46 or so.

The last few trading days of the month are generally positive, so we could see some rally this week.  The industrial metals is a complex picture, so if we were invested in CPER, we would keep it, but we would put new money in DBB.

We continue to see signs of a tired market.  While we would not chase oil, we expect higher prices in the very short-term.

Breadth on the NYSE was negative last week, not by much, but it still is a sign of a tired market.  Transports have been one of the best indicators of economic strength and they have been diverging, suggesting economic weakness.  So far, our forecast on TLT has been reasonably accurate. We have rallied to the 90-area and started to roll over. Now we will see if the rest of our forecast works, and rates rise into October.

We continue to think that there should have a short-term pullback in stocks and bonds on FED news, but that if this occurs it should be a buying opportunity. We remain bullish through the end of the year.

These indexes look ripe for a short-term pullback. QQQ is overbought but does not have the same sort of topping signs.  We think Japan is a new secular bull market that can advance for years.

Stocks are trading a little better than we expected but we still expect some pullback into October followed by a sharp advance into yearend. We have mentioned that TLT was hitting the point of maximum danger when the weekly stochastic became overbought and sell recycled. With this rally, it is very close.

We are bullish for yearend but think a nice dip could occur which would set up a better entry on the long side than you could get on the short side.  We should mention that we are now in what could be the riskiest part of the year for Treasury Bonds. Watch our interest rate indexes carefully.  The McClellan Oscillator suggests that in spite of some good days last week, momentum is slowing.

Stocks rally into Labor Day weekend most of the time. So, we are not surprised to see some upside here.

In spite of last Friday’s action, we have no major change in our outlook, which is to be cautious on the equity markets into late September/early October.  We acknowledge Powell’s speech but note that longer-term bonds advanced very little – in other words our concern about a rise in long-term rates remains.

We continue to signs of an impending pullback.

We are not selling leading securities, as we think the market will make new highs into the end of the year after this dip.  Seasonal strength in petroleum is ending at the end of August.  We believe Japan is starting a new secular bull market.

Stocks continue to advance, and we would continue, slowly, getting more defensive, selling underperforming positions, and holding that cash.

Still looking for a short-term peak in the next few weeks.  Our volatility indicator is suggesting an up-tick in volatility is coming.  Several indicators for TLT have set up and we now have enough of a buy signal to buy it here with an objective of 92 that should be hit in the next couple of weeks.

Bonds continue to rally, albeit more slowly than we would like to see.  GDX (Market Vectors Gold Miners ETF) has started a potential breakout.

We will continue to sell underperforming positions, and prepare for a more severe pullback, and while we still believe that should start later in August, but if we are a few weeks wrong about the timing this pullback could be starting now.