Monthly Report

The McClellan is around 9, which means it could rally, or pull back. Overall, breadth is improving short-term but the momentum of breadth is weak, suggesting a pullback. The intermediate-term breadth picture is still weaker than we would like to see. The McClellan is our most sensitive breadth indicator and it is weak.

Weekly indicators suggest a pullback could occur. The popular averages are making record highs. Key indexes such as Transportations have been lagging, suggesting the possibility of a pullback over the next few weeks.

Stocks consolidated for the first part of June, and now the popular averages are making record highs.

Equities fell a bit more than anticipated after surprising news. However, the market bottomed and started what should be the expected summer rally. Stocks could consolidate for the first part of June, and then advance. Intermediate sentiment suggests a strong rally is likely.

Investor’s Intelligence %Bears is wow above 30 is a plus, as the indicator is where it was during the depths of the Pandemic in 2020. Overall, this suggests the sentiment backdrop is positive intermediate term.

So far, it looks as if our 480 to 485 area will hold this decline, but we could see some fairly violent moves up and down before price stabilizes. 

Oil and Gasoline are close to entering negative seasonality. Watch oil via USO, UGA and DBC carefully. The oil stocks have ignored seasonality because of improved earnings – and oil has positive seasonality through March but not much longer.

Now we are looking for a pullback into February/March. This should set up a strong rally. We will deploy all cash on a weekly buy signal

The equity markets have improved, but the New Highs / New Lows Indicator is lagging, suggesting selling is going on that is not reflected in the Cap Weighted averages.

Equities experienced a strong rally after the election. Watch our breadth indicators as they are weaker than we would like to see on a kickoff rally.

Prices were sideways to down before the election, and are rallying after, in line with our forecast, but are stronger than we expected.

Please find the link for the latest The FRED Monthly Review below. The Monthly Review is essentially a chart book of various asset classes and a comprehensive view of the U.S. equity market.

Equities experienced a very sharp drop in early August and rebounded but this does not really change our forecast of a choppy corrective market into late September/early October, followed by an advance before the election.

Equities have experienced a very sharp drop and are rebounding but this does not really change our forecast of a choppy corrective market into late August/early September, followed by an advance before the election.

Put/Call has moved down to the low end of the range. This indicator is rated negative as it has dropped back down this month, as the market rallied. It is showing a bit more complacency.

The dollar tested the 106-area and failed so far, but the intermediate picture is still strong. Look at a long-term chart of the dollar. The dollar is a multiyear uptrend (since 2008) and this could be resuming.

TLT is trying to make a short-term bottom: TLT failed at resistance around the 100-area and now has a pattern of lower highs and lows. The daily stochastic is overbought, and the weekly is a new buy recycle. The recent short-term rally tested 90 but failed to move above it. Another advance to 100 would improve this chart.

Put/Call Ratio is moving up, a bullish surprise. We have seen a couple of spikes in the last year that are positive, and this is positive when it should be dropping. These swings in sentiment are a positive for the market – consensus can lead to problems and a one-sided market.

The market via SPY has rallied but other indexes are lagging. This is a set up for a pullback unless IJR and MDY pick up soon. MDY is improving and hit new 52-week highs.

TLT is rallying, but the trend remains down. Accumulation models have weakened. MUB, LQD, and HYG have bottoming formations, and are stronger than TLT.