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Coolhand's Market Analysis

Bears Get Hammered Again

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Last week, I said the chances of a pullback were rising. I felt that is was time to start getting more defensive as the bulk of the rally was likely behind us. But NAAIM was bullish, as was liquidity and breadth. The fact that so many technical indicators were now positive is often an early warning, but tops are very difficult to call. I thought that the market might bias higher last week, but thought we should look for weakness to being around mid-week. That weakness came on Thursday, but not until fresh all-time highs had been hit. And the weakness was minor. Friday saw a bigger dip, but not a deep one.

Momentum is starting to turn down. This could be a sign that the upside has topped or is not far from a top.

MARKETTIMERS ALLOCATION-s-p-500-png

The S&P 500 is now well above its June peak after an impressive rally off the early July bottom. You can see that momentum is starting to dip and RSI has gone flat.

MARKETTIMERS ALLOCATION-dwcpf-png

The DWCPF is showing a similar picture.

The weakness that began late last week could give way to some sideways movement; perhaps with some volatility. That's just an educated guess. We are due a deeper correction, but pin-pointing when that happens and from what level is difficult to ascertain. NAAIM remains bullish. Breadth and liquidity remain bullish, but are weakening modestly.

I am neutral for next week, but remain flexible to change that sentiment as the indicators dictate.

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