SPY has held support and should rally back to the top end of the trading range, and possibly break out to new highs. TLT has rallied up to the top end of the range we have looked for and should start to pull back this week.
We continue to see consolidation that is bringing a buy recycle in the daily stochastics. DBA is moving down into the timeframe we are looking for as a price low, so for traders we should start to look for intermediate buy indications.
Bonds had a daily buy recycle and are up, while SPY had a daily sell recycle and is down. A higher low on a buy recycle in SPY could set up new highs for that index.
We are watching the trading in IJR this week, which could break above 82 this week. If that happens the market could do well in September and October, rather than the other way around, as most people think.
IWM is a buy recycle on the weekly, and IJR is stronger showing relative strength. These markets are suggesting that there is no likelihood of recession.
We saw some key reversals on GLD (SPDR Gold Trust) and SLV (iShares® Silver Trust) - in particular SLV - last week. We have had, and continue to have, concerns that our accumulation models have suggested a sharp drop in the metals, and that prices were not sustainable in the 140 area.
A tradable bottom is close at hand. We would hold DBC for now. It looks like some rally should occur. While Oil has negative seasonality at this time, the indicators have already come down, indicating some rally is possible from here, even if there is further decline later in the year.
This movement has served to continue to drop the weekly indicators into buy territory and is line with our view that more work is needed in this bottoming pattern.
One of our favorite short-term breadth indicators is the McClellan Oscillator. It has built a bottom as well, but may need a bit more work, along with other indicators.
This “aggressively going nowhere” behavior is essentially causing the weekly indicators to come down and the market may be on “hold” until the overbought condition is further resolved on the weekly.
Last week’s corrective behavior brought daily indicators down into buy territory, but some weekly indicators may need a bit more time to set up an intermediate buy configuration.
Advisors have added some money per our instructions, and the question is obviously if this is the ultimate low of this correction? It certainly could be but the most important thing to us is that the risk now looks to be no more than 276 to 277.
It is probably a bit too early to suggest we are out of the woods, but at the same time advisors with new money or new clients can start to put people into their models. TLT has performed better than we thought it would on this move, but now it is in a position where the accumulation model does not support prices, and it is overbought.
While the behavior of small and mid remains a concern, there are enough positive indicators such as the advance decline line (at new highs!), and improvement in some of our weekly proprietary breadth measures that suggests the market actually looks reasonably attractive, within this summer doldrums period. If above 98, the dollar could test the highs of 2017 in the 105-area. This could become interesting for other markets, probably hurt stocks.
