Stocks on June 8, 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. Put/Call Ratio is at January 2018 lows. A short term bearish sign for the stock market.
  2. Job Openings making new highs. A medium-long term bullish sign for the stock market and economy.
  3. Initial Claims are still trending lower. A medium-long term bullish sign for the stock market and economy.
  4. Continued Claims are still trending lower. A medium-long term bullish sign for the stock market and economy.

Read Study: the Fed’s rate hike is a short term bearish factor for the stock market
Read Study: the Fed’s rate hikes are medium-long term bullish for the stock market.
1 am: Put/Call Ratio is at January 2018 lows. A short term bearish sign for the stock market.
The Equities Only Put/Call Ratio (sentiment indicator) is near January-2018 lows, which means that traders are very bullish on the stock market right now for the short term. This sentiment indicator is a short term bearish sign for the U.S. stock market.

With the S&P 500 at its range resistance, a small pullback would not be surprising.

That being said, I focus on the medium-long term instead of the short term. The short term is much harder to predict than the medium-long term.
1 am: Job Openings making new highs. A medium-long term bullish sign for the stock market and economy.
The latest reading for JOLTS (Job Openings) just made a new high for this economic expansion cycle.

This confirms the medium-long term bullish sign in Initial and Continued Claims. JOLTS is a leading indicator for the stock market and economy. This chart demonstrates the positive correlation between JOLTS and the S&P 500. An uptrend in JOLTS = an uptrend in the S&P 500.

1 am: Initial Claims & Continued Claims are still trending lower. A medium-long term bullish sign for the stock market and economy.
The latest reading for Initial Claims went down a little from the previous week’s reading while Continued Claims’ latest reading went up a little.


The key point is that Initial Claims and Continued Claims are still trending lower right now.
*Initial Claims & Continued Claims lead the economy and stock market. Historically, they trended higher before a bear market in stocks started (see study).
We use Initial Claims data in these 2 trading models (here and here). These 2 trading models state that you should be long stocks right now because Initial Claims data is still trending downwards.
This suggests that the bull market in stocks is not over because Initial Claims & Continued Claims have not trended higher yet. HOWEVER, we are watching out for any SUSTAINED increase in this data series because Initial Claims & Continued Claims are very low right now (historically speaking). We are trying to catch the bull market’s top because the bull market most likely only has 1-2 years left.


This chart demonstrates the inverse correlation between the S&P 500 and Initial Claims. A downwards trending Initial Claims = bullish for the stock market.

This chart demonstrates the inverse correlation between the S&P 500 and Continued Claims. A downwards trending Continued Claims = bullish for the stock market.

Read Stocks on June 5, 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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