Market Briefing For Monday, July 31

For the market's rather orthodox projected morning turn to the upside from the continuation slide, and with the recovery persisting late in the day (part of that suspected related to near-month-end activity as well as intraweek squaring), the US didn't make it through the day unscathed. 

Besides the Euro firming again as suspected, Oil  gaining a bit more as targeted (more yet to come near-term) and the general relief (in many circles) of the failure of the 'minimal' healthcare repeal bill, what of course really caught the market's eye happened in the afternoon. 
 

In sum, nothing has changed in our market view from the last report (very lengthy and covers the issues). Of course there's relief the market didn't just fall apart; but we didn't think it would; given the technical cushion remaining.

I don't dispute the case for long-term slow growth in the very long run after passage of needed tax cuts and other reforms but that's the same point I've made about contrasting a forthcoming correction with the catastrophe some of the super-bears are calling for. The difference is what we have, a more or less orderly opportunity (on a rotational basis) to build cash into strength on a number of occasions (and group-by-group) for a couple months really, at the same time having no reason for investors to panic into weakness on the (so far occasional) more notable shakeout days like Thursday.

Yes we suspect more and heavier drama is in-store; but it's a process. Just look at stochastic levels and oscillators and their to-and-fro swings truly supports the idea of this being a 'process' not some grand event. There may be a grand event; but that's perhaps near a washout culmination of decline; not the initial phases that are actually likely behind as everyone debates of course what comes next.

August has a mixed history; but is usually defensive. We believed that we'd see relative stabilization into mid-July then it would start eroding and maybe deteriorate faster down-the-road a bit. I don't see anything different. 

For now let's see if we can get another (likely mild and tentative) intraweek rally after perhaps a softer start to the week; and then reflect more August exhaustion. It's hard to say whether there will be much buying or selling that is particularly related to month-end activity for July's final session.

There is no change in our overall perspective that essentially says this is a market running on fumes and trying to generate stability where it can just to merely keep the primary 'structure' from clearly turning the other way. Keep in mind (going back a couple weeks ago) we thought ideally you'd get a pop (and it wasn't that impressive) and then ultimately work down through lower levels of the range that has prevailed. 

We're expecting the second part of all that to become more evident in the weeks ahead. The dynamics remain fluid, which makes it tricky for traders; because neither the rallies or the declines have much follow-through 'yet'.