Stocks on April 19, 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. Interest rates are on the rise again. Not a medium-long term bearish factor for the stock market.
  2. Breadth has made a new high. A medium term bullish sign for the stock market.
  3. YoY change in Industrial Production is still trending higher.

Read Study: breadth suggests that the stock market’s bottom is already in
4 pm: Interest rates are on the rise. Not a medium-long term bearish factor for the stock market.
The 10 year Treasury yield is on the rise again. Some expect it to breach the 3% level.

I expect this to happen eventually as well. However, this is not a medium-long term bearish factor for the stock market. For starters, interest rates probably won’t “soar” after the 10 year yield breaches 3% because inflation is still mostly flat. Inflation hasn’t even made a new high from February 2017 to present.

  1. Rising inflation isn’t consistently bearish for stocks.
  2. The 10 year yield typically needs to get to 4.5% before it can hurt stocks.

The yield curve is flattening right now. This means that long term interest rates will go up much more slowly than short term interest rates. Hardly a “surge” in long term yields.

1 am: Breadth has made a new high. A medium term bullish sign for the stock market.
We demonstrated last week that the stock market is forming a big bullish breadth divergence. That bullish breadth divergence continues to play out. The cumulative Advance-Decline line made a new all-time high yesterday even though the S&P 500 hasn’t! This is a medium term bullish sign for the S&P 500, which means that January 2018 wasn’t the bull market’s top.

1 am: YoY change in Industrial Production is still trending higher.
Industrial Production expanded 4.3% from a year ago. Industrial Production growth is still trending higher.

This is more of a medium-long term bullish sign than a bearish sign. Sometimes Industrial Production and the equities bull market peak together. But most of the time Industrial Production growth decreases before an equities bear market begins.

Read Stocks on April 18, 2018: outlook

Outlook

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

  1. The S&P has made a 6%+ “small correction”. This will not turn into a “significant correction”.
  2. 2018 will trend higher but also be a choppy year. There will be another correction later this year.
  3. Why I’m medium-long term bullish on the stock market from a discretionary point of view.
  4. 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. So please take my short term thoughts with a grain of salt.
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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