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Stocks getting a little weary

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Stocks were holding up in early trading, but a late morning decline took over and we saw a little defensiveness for the first time in several days. The Dow turned negative near the close and lost 24-points, and the other major indices were fairly mixed with the S&P 500 and Nasdaq down modestly, the small caps (Russell 2000) were flat, although the S-fund was down slightly, and the Transports rallied big.

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The Transportation Index got that pop we talked about yesterday after the JB Hunt Trucking earnings yesterday. JBHT was up 5.56% yesterday, but after the close CSX Corporation (a railroad company) was down 6% in after hours trading, and that may cause some flip-flopping after the Transports hit, and backed off, a rising resistance line.

Some bigger corporate names start reported soon, and into the next week or two so I suspect we'll get a lot of back and forth buying and selling of the winners and losers. The bellwethers can of course be market movers.

For those who follow this sort of thing, there was a full moon last night. For what it's worth, tells us, "after all five full moons in July over the past 20 years, if the S&P was at or near a high, it fell over the next 1 or 2 months."

The S&P 500 (C-fund) took a little break from its 5-day rally to slip toward the lower end of that trading channel, which does look like a wedge, and would be more bearish than a parallel channel. There's support near the May highs and at the bottom of the open gap near 2945. If we see anything more severe, and I'm not saying it will happen since we're just one day off of all time highs, but the moving averages are so far below the current levels that any normal test of them would be a pretty stiff pullback at this point.

And a reminder while things are going very well, that when support is well below current levels, if things do get dicey there can be a rush for the exits. Remember the rally in January of 2018? It seemed unstoppable, until...

The DWCPF (S-fund) held up better than the large caps yesterday and there a little debate going on about whether the Russell 2000 being 10% below its all-time highs while the S&P is basically at new highs, is a warnings sign. The other side of that argument is that if they catch up, the upside potential return is more attractive. The divergence between the two is quite stark and since 1979, when this happened the Russell continued to underperform a year later 91% of the time.

The I-fund lagged on the day as the dollar spiked on strong retail numbers. The little bear flag broke down, but the old May high held on a closing basis.

This year to date chart of the dollar shows the resilience, and we only saw one brief breakdown from the current longer-term rising support line. This is putting pressure on the I-fund and commodities.

Oil was down on the strong dollar, but remains in a rising channel after making a low in early June. It had broken above the descending resistance line off the April high, but yesterday it fell back below it, and the 200-day average.

AGG (Bonds / F-fund) continues to consolidate since breaking down from that first rising support line. This could be healthy for bonds, and if the Fed is going to cut rates, the pullback in bonds may not last too long.

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Thanks for reading. We'll see you back here tomorrow.

Tom Crowley

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SPY (C Fund) (delayed)

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DWCPF (S Fund) (delayed)

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EFA (I Fund) (delayed)

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AGG (F Fund) (delayed)

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