Stocks on August 14, 2018: outlook


*These are my discretionary thoughts on the market. My Medium-Long Term model determines my trades. Go to the homepage for my latest market outlook.
The economy and stock market move in the same direction in the medium-long term. Hence, leading economic indicators are also leading indicators for the stock market.

Thoughts

  1. VIX suggests that the stock market’s short term bottom is near.
  2. Freight Transportation Services Index is trending higher. A medium-long term bullish sign for the stock market.
  3. Commercial and Industrial Loan Growth is trending higher, removing this bearish worry for the stock market.

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Read Study: gold continues to crash. Now is not the time to buy
Read Study: financial conditions are still too easy for the bull market to end
1 am: VIX suggests that the stock market’s short term bottom is near.
VIX went up today as the S&P 500 went down. It is now above its 2 standard deviation Bollinger Band. This suggests that the stock market’s short term downside is limited.

As you can see, VIX’s upper Bollinger Band represented short term bottoms for the U.S. stock market from February – present. When VIX crossed its upper Bollinger Band, the stock market was either at a short term bottom or close to making a short term bottom.
1 am: Freight Transportation Services Index is trending higher. A medium-long term bullish sign for the stock market.
The Freight Transportation Services Index measures the volume of the movement of freight in the U.S. This indicator tends to flatten or fall before an equities bear market or economic recession begins.

The latest reading for the Freight Transportation Services Index made a new high. This suggests that the bull market in U.S. stocks will continue.

1 am: Commercial and Industrial Loan Growth is trending higher, removing this bearish worry for the stock market.
Last year one of the biggest worries investors and traders had was that Commercial and Industrial Loan growth was trending downwards and on the verge of turning negative.

I said that Loan growth isn’t useful for predicting the stock market or economy. Its correlation with the stock market is mostly random.

  1. Sometimes bull markets end when Loan Growth is VERY HIGH.
  2. Sometimes bull markets end when Loan Growth is turning negative.

Based on the latest data, Loan Growth is now trending upwards. Hence this bearish “worry” should be removed.

Read Stocks on August 13, 2018: outlook

Outlook

Here’s what I think will happen based on my discretionary outlook.

  1. 2018 will trend higher but will also be a choppy year.
  2. The S&P 500 has approximately 1 year left in this bull market.

I do not use my discretionary outlook to place entry/exit trades. I am 100% long SSO (2x S&P 500 ETF) because my Medium-Long Term model does not foresee a big correction at this point in time. I ignore small corrections. I only sidestep big corrections and bear markets.
I have been long the S&P 500 since September 7, 2017 when it was at 2465.
*I also have a small Day Trading portfolio. Click here to view my day trades.

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