Saturday August 15, 2015

$SPY, $STUDY After some wild moves from earlier in the week and an indecisive session Thursday, investors stayed away from the market on Friday. Trading was very slow as there was little news to set a direction. The good news was that after a flat morning, stocks were able to push modestly higher in the afternoon with financial and industrial stocks leading the way.

As of Friday’s close both the Alpha Major Market Model and the short term Traders Model are Bearish, the Asset Allocation Recommendation remains at 25% Long and 75% Cash. The underlying watch lists which we monitor remain 60% Bullish,but upon further review one must note that this position is clearly carried by the Bullishness of the Master List of stocks which was freshened at the end of July.  This is markedly a stock pickers market and you had better be a very good one at that.

Stocks were set up for some oversold bounce on Monday at the beginning of this past week. But that setup was jolted by the Chinese currency devaluation. Although there may be other unexpected events which could shock the market, with the Chinese currency moves behind us stocks should resume their upside probe in the coming weeks. There were many positive divergences between the price moves of the major indexes and their technical indicators as well as market internals when stocks dipped on this past Tuesday and Wednesday. These positive divergences tend to suggest that stocks have reached a short term bottom. With that said, the S&P 500’s chart has developed a triangle pattern since early July. A triangle pattern suggests more sideways moves until there is a breakout one way or the other. For now, the upper bound (resistance) of that triangle stands near 2095 and the lower bound (support) stands near 2076.