Stocks Outlook - Friday, July 6

 

This trade war news is a short-term bearish factor for the stock market but not medium-long term bearish. Perspective matters, and so far the trade war is relatively minor.

1 am: Dennis Gartman said that “we are in the beginning of a bear market”. This guy is one of the best contrarian indicators out there.

Gartman went on CNBC yesterday to say he thinks that the U.S. stock market is in the beginning of a bear market. You can see the interview here

I don’t usually mention individual “analysts” here on the blog because most of them are just “guessing” where the market will go next without actually looking at data, but Gartman is worth noting. This guy is right less than 50% of the time, which is why he’s frequently regarded in financial circles as the “best contrarian indicator”.  Just Google “gartman is a contrarian indicator”, and you’ll find this.

 

Needless to say, Gartman’s long-term bearish case supports the long-term bullish case for stocks. How this guy constantly appears on CNBC is beyond me.

1 am: Initial Claims are still trending lower. A medium-long term bullish sign for the stock market and economy.

The latest reading for Initial Claims went up from the previous week’s reading (231k vs 228k). The key point is that Initial Claims are still trending lower right now.

 

*Initial Claims lead the economy and stock market. Historically, its trends higher before a bear market in stocks started (see study).

We use Initial Claims data in these 2 trading models (here and here). These 2 trading models state that you should be long stocks right now because Initial Claims data is still trending downwards.

This suggests that the bull market in stocks is not over because Initial Claims have not trended higher yet. However, we are watching out for any SUSTAINED increase in this data series because Initial Claims are very low right now (historically speaking). We are trying to catch the bull market’s top because the bull market most likely only has 1-2 years left.

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