Stocks on June 21, 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. I update this webpage throughout the day.

Thoughts

  1. A warning sign for the stock market, but not necessarily bearish.
  2. Crude oil prices are stabilizing, which will relieve inflationary pressures on the economy and stock market.
  3. Building Permits fell a little but are still trending higher. Medium-long term bullish for the stock market.

Read Study: the NASDAQ’s outperformance vs the Dow is very bullish
Read Study: the S&P 500 has been very quiet. A slightly bullish sign for stocks
1 am: A warning sign for the stock market, but not necessarily bearish.
Most of the signs that we see here at BullMarkets are bullish, but here’s one for the bears.

As you can see, both interest rates and oil have been going up together since 2017. This is a somewhat bearish sign.

  1. Oil and interest rates went up together during the 1990 economic recession and “significant correction”.
  2. Oil and interest rates went up together before the dot-com bubble peaked in 2000.

But as you can see, there are also some false signals.

  1. Oil and interest rates went up together in 2005, 2 years before the bull market topped in 2007.

It’s also worth noting that oil and interest rates soared in the 1970s, many times during which the stock market kept going up.
So while this is a bearish sign for the stock market, taken together with all the other bullish signs that we’re seeing, the market is bullish on balance. Never will there be a case in which 100% of the factors are bullish or 100% of the factors are bullish. What matters is whether most of the factors are bullish or bearish.
1 am: Crude oil prices are stabilizing, which will relieve inflationary pressures on the economy and stock market.
A few months ago everyone was afraid of “surging inflation”. I said that inflation is mostly a function of the year-over-year change in oil prices.


Crude oil prices are stabilizing right now, which means that the year-over-year change in oil will stabilize soon. This also means that the stock market and economy are not at risk of “surging inflation” right now. Inflation will soon start to flatten.

1 am: The latest reading for Building Permits fell a little but are still trending higher. Medium-long term bullish for the stock market.

The more important fact is that Building Permits are still trending upwards.

Like Housing Starts, Building Permits is a leading indicator for the stock market and economy. The stock market trends higher when Building Permits are trending higher. The stock market enters into a bear market when Building Permits are trending lower.
*The stock market and economy move in the same direction in the medium-long term.
Read Stocks on June 20, 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 1-2 years 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 significant correction at this point in time. I ignore small corrections. I only sidestep significant 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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