MON Sector Strength – TUE Rates – WED Medium-Term – THU Commodities Currencies – FRI Sentiment – SAT Longer-Term

The Short-Term Trend

The short-term trend is down as of Friday. The Junk Bond chart shows the break in trend clearly.

This chart below shows how the NYSE stocks remained reasonably healthy over the last few months while the NASDAQ stocks were weakening. Then again, with the SPX pushing to new highs, this chart of the bullish percents shows that the broad market is not participating.

One bad day in the market doesn’t mean much, but I have been feeling negative towards stocks for a while because the indexes were climbing while the number of participating stocks were declining.

We have all seen this before, and sometimes the strong stocks eventually lead the weaker stocks higher.

But so far there is little to indicate that the weaker stocks want to participate, and, in my view, that means that this rally will run out of steam.

In the short-term, I do not like stocks.

The Long-Term Outlook

US stocks are shown in the top panel, and German stocks in the lower panel. These two markets are usually highly correlated, but lately they are parting ways. US stocks are pointed higher while German stocks are pointed sideways. I don’t like it. 

The Semiconductors are critical.

The ECRI index is too weak. It is pointing to a slowdown in the economy, and this does not favor higher prices over the remainder of the year.

Rates

Short-term yields are still pointed higher, but longer-term yields are once again pointing lower.

Outlook Summary:

The long-term outlook is cautious. The ECRI index points to an economic slowdown.
The medium-term trend is up as of May-10. Sentiment indicates caution.
The short-term trend is down as of Aug-11.

The medium-term trend for bond prices is up as of Aug-11 (prices higher, yields lower).