Score one for the bulls.
July 5th is a seasonally and historically good day and
yesterday was no exception. I won’t even give you a, “yeah, but the
rally was on low volume”, this time. The volume was low but not
because there was a lack of bulls, but because it is now summer and
summer vacations are kicking in. There are just fewer people
trading.
I will be impressed if this rally continues. The S&P 500 seems to
be in a short term 10 to 15 point trading range and it is now at the
top of that range. More strength would be a surprise but not out of
the question since the first week in July is the strongest part of
the month. This seasonality information is not a primary indicator
but I’ve likened it to a stiff breeze while riding a bike. If
seasonality is positive, it may help push the market more easily.
If it is negative, the market may have to peddle a little harder.
This year, seasonality data will turn negative on July 18.
Some indicators had backed off of their overbought readings but the
last two days have put them back near those levels again. If we
were able to “short” the market (actually bet and make money when
the market goes down) I would be considering it on any more
strength. Since we can’t “short” all I can do is stay out of the
way of stocks. The S&P 500 has made back about half of what it lost
in mid to late June. If I were still in stocks, I would be taking
advantage of any strength at this point to get out.
Despite
the rise in interest rates, interest
sensitive small caps have done particularly well lately. I’m afraid
that when the market does pullback, there will be more damage done
there, since they have come such a long way.
Oil is flirting with $60 a barrel again. I don’t know if this is
true all over the country, but I have only noticed a small move in
the price of gasoline since oil has made this move from $47 to $60.
Gas has gone from about $2.19 to $2.29 in that time. Perhaps we
should be watching the price of gasoline instead of the price of
oil.
So we have rising oil prices, rising interest rates, we're in
earnings warning season, we have a market heading right into the
thick of the weaker part of the year, plus an overbought market, and
to me that adds up to caution for the short term. Maybe I am not
giving this market enough respect. I used to say let the market
tell you what it is going to do. That is probably the way a trader
should approach it. The problem is you have to bring your bias and
emotion into that game. That has always been a losing game for me.
I depend on my emotion-less indicators to guide me. They may not
always time things perfectly, but they seem to sense future market
direction much better than I do.
That's all for today. Currently 100% G fund.
Until next time...