Outlook For Stocks - Tuesday, May 29

Thoughts

1. Insider Transaction ratio is short-term bullish for the stock market.
2. The stock market is at a decision-making point. Will either breakout or decline in the next 1-2 weeks.
3. Sentiment towards the stock market is neutral. Sentiment doesn’t give traders an edge in the markets right now.

1 am: Insider Transaction ratio is short-term bullish for the stock market.

Barrons produces an Insider Transaction Ratio, which is the ratio of insider sales to buys. Readings under 12:1 are short-term bullish for the stock market, readings above 20:01 are short-term bearish for the stock market. The latest reading is approximately 9:1. This is a short-term bullish sign for the stock market right now.

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1 am: The stock market is at a decision-making point. Will either breakout or decline in the next 1-2 weeks.

We can use daily RSI (a momentum indicator) to gauge the S&P 500’s “market stages” by applying support and resistances to RSI itself. As you can see, the S&P’s RSI is still stuck at levels at which previous bounces stopped.

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The next 2 weeks will be critical for the S&P 500. The S&P’s RSI will either break this resistance and the S&P will rally to new highs, or the S&P’s RSI’s resistance will hold and the S&P will revisit its trendline resistance.

It’s decision-making time. An upside breakout is more likely.

1 am: Sentiment towards the stock market is neutral. Sentiment doesn’t give traders an edge in the markets right now.

The AAII Bulls Ratio is a useful contrarian sentiment indicator for the U.S. stock market. It isn’t registering any extremes right now (i.e. it’s slightly bullish right now), which means that this sentiment indicator isn’t sending a SELL signal.

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Outlook

Here’s what I think will happen based on my discretionary outlook.

1. The S&P has made a 6%+ “small correction”. This will not turn into a “significant correction”.
2. 2018 will trend higher but will also be a choppy year.
3. The S&P 500 has approximately 1-2 years left in this bull market.