The Stock Market: Another Episode Of The Good, The Bad, and The Ugly

Random Thoughts

The good news is that the indices rallied on Monday. The bad news is that they are overbought from their recent rally and due to correct.

The good news is that the Rusty managed to close at all-time highs. The bad news is that breakouts can often fail, especially when the market is already overbought when the market breaks out.

The good news is that more and more sectors such as Heath Care Plans, Insurance, and Regional Banks have been banging out new highs as of late.

The bad news is that many sectors, especially capitally intensive areas such as Materials & Construction, appear to be making a new leg lower.

This isn’t a surprise when you consider how ugly Bonds have been as of late. Rates have been rising at an alarming rate. It’s not the absolute level that’s important, it’s the delta (rate of change) that’s scary.

Speaking of ugly, Gold remains in a serious downtrend. What’s concerning is that it hasn’t had the flight to safety one would expect given the recent slide in stocks. This suggests that someone needs to raise money—and fast.

Also ugly is most markets outside of the U.S. This is especially true in emerging markets. Plot the EFA and EEM shares if you get a chance.

I can go on and on but just take my word for it: Things remain mixed. Therefore, nothing has really changed:

When things get conflicted you need to become very very selective. Do you really really like a setup? If so, take it. Just make sure you wait for entries. That, in and of itself, can often keep you out of trouble.

Futures are strong pre-market.

Best of luck with your trading today!

Dave