Bull Vs. Bear. The Line In The Sand?

The State of Internal Momentum

Next up are the momentum indicators, which are designed to tell us whether there is any "oomph" behind the current trend.

View Momentum Indicator Board Online

The Bottom Line:

  • Although there has been some modest deterioration, the primary color emanating from the Momentum board remains green this week. As I mentioned last week, the key takeaway here is the recent momentum thrust buy signals suggest a buy-the-dip environment has returned and that looking back at history, the gains to be expected over the next six- and twelve-month periods are above normal.

The State of the "Trade"

We also focus each week on the "early warning" board, which is designed to indicate when traders might start to "go the other way" -- for a trade.

View Early Warning Indicator Board Online

The Bottom Line:

  • What a difference a couple of weeks can make on the Early Warning board. That "warm and fuzzy" feeling everyone seems to now have toward the stock market has caused the board to flip from green to red. And while stocks can certainly "get overbought and stay overbought" for extended periods of time, the board is suggesting that a pullback - or, at the very least, a pause that refreshes - continues to be a probable outcome in the near-term.

The State of the Macro Picture

Now let's move on to the market's fundamental factors - the indicators designed to tell us the state of the big-picture market drivers including monetary conditions, the economy, inflation, and valuations.

View Fundamental Indicator Board Online

The Bottom Line:

  • As I wrote last week, the Fundamental Factors board suggests that the fundamental backdrop for equities remains constructive. However, it is worth noting that there is some weakness starting to creep into the monetary and economic composites. But for now, this board says the bulls should be given the benefit of any doubt.
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Disclosure: At the time of publication, Mr. Moenning held long positions in the following securities mentioned: none - Note that positions may change at any time.

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