Higher Rates Are A Headwind For US Stocks

Nice market today! Things are definitely looking a lot better than last week. I don't think we can declare a new uptrend quite yet though because the new 52-week lows are still a bit too elevated.

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In addition, the bullish percents continued to drift lower today, although sometimes these indicators don't turn as quickly as the others. Still, this isn't the look of an uptrend yet.

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Maybe we'll continue to get these dramatic, headline-driven moves up and down in the market until this trading pattern shown below is broken.

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US Dollar weakness continues.

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International bond ETFs are breaking to new highs.

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US Treasury Bonds may be ready to trend higher. For how long, I am not sure. Sentiment has been overwhelmingly negative towards US Treasuries, so a rally here makes sense from a contrarian view.

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I like the looks of this ETF.

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Sector Strength

Stick with the areas of market showing the best relative strength which includes Technology, Defense, Banks, Brokers and Emerging Markets.

I continue to be surprised by the strength of Consumer Discretionary, and I am not sure about the Copper Miners.

It is tempting to buy some of the laggards, but I rarely do well buying groups that are performing poorly. I usually get discouraged and sell before they have time to start to perform.

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Outlook Summary:

I am expecting a choppy, headline-driven, sideways market between now and the November elections. I still plan to buy the dips for short-term gain, but over time I plan to continue to reduce my overall exposure to stocks.

The expected US economic growth rate is back down to the 2% level.

Higher rates are now a headwind for US stocks. The recent tax cut, the 300 billion spending increase, and the already out-of-control federal deficit are a set up for a very dangerous spike in interest rates.

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Disclaimer: I am not a registered investment advisor. 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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