General Stock Market Commentary - Friday,July 3

During the trading hours on Friday, I thought that a new short-term uptrend had started for the general market. However, after reviewing the charts, I think we are still waiting for the new trend to begin. For instance, there was no tick higher in the PMO index.

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Some charts are starting to turn higher such as the SPX equal-weight. The stochastic is beginning to turn up off its lows while prices held above the uptrend line and the support level. This is a bullish looking set-up.

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The canary indexes continue to trade above their 50-day averages. I like to trade in the direction of junk bonds so holding at the 50-day is encouraging.

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The 10-day call/put index (inverted put/call) was way off on Friday. My guess is that there was a lot of put buying in response to the spike in positive COVID cases. This is obviously the opposite of what we need to see in this index while looking for an uptrend.

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I added the 10-day call/put ratio to the lower panel of the PMO index chart, and you can see how nicely they correlate. So, in order to call a new uptrend, we need to see some evidence that the call/put is turning up while the PMO is at its lows.

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This is a chart of the FFTY ETF that holds some of the very best small-cap growth stocks, and it is a beautiful rally off the lows. Now it has reached up to its gap-down level in late-February. 

What happens next? At a minimum, I think we should expect this index to at least struggle here a bit under resistance, and for a handle to form before heading higher.

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Another look at the small caps (IWM) just under resistance. A handle is already forming for this ETF. A rally above the 145-level would be positive for the general market.

I added this 1-year chart of the JNK ETF just to show how nicely the stochastic reveals the short-term turns in the trend. I think this is a reflection of the general stock market. We get 6-7 opportunities per year to buy stock market dips, and we are probably near one of those opportunities now. 

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Disclaimer: I am not a registered investment adviser. My comments above reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, ...

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