The Dow Jones Industrial Average continues its upward trend, gaining about 900 points since our last issue, helped by another great quarter of corporate earnings. With 81% of the companies in the S&P 500 index reporting, 80% beat earnings estimates and 74% surpassed sales forecasts. Those are the highest numbers since FactSet began reporting in Q3 2008.
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Market Views
Long-Term Trend Remains Up
The overall market remains in decent shape, with the longer-term trend firmly up, though the intermediate-term trend is a bit iffy. But there remains a ton of rotation and crosscurrents in the market, with many (but not all) growth stocks getting hit and money flowing into some more cyclical and defensive areas.
Thus, you shouldn’t be super defensive, but it’s best to pick your spots, honor your stops and focus on names that have recently seen a bunch of buying.
Michael Cintolo, Cabot Top Ten Trader, www.cabotwealth.com, 978-745-5532, August 6, 2018
Watch the Oscillator
While the market doesn’t have anything to fear in the way of a crash there is still no denying that the market is vulnerable to at least some selling in the immediate term. The 20-day price oscillator for the S&P has been reflecting a drastically “overbought” market condition. This can be discerned by examining the following chart exhibit, which shows the 20-day oscillator at one of its most “overbought” readings of the year to date. As long as this indicator reflects an overheated market condition, the S&P 500 could easily see some downside in the days ahead. Until this indicator shows improvement, investors should be prepared for a potentially bumpy ride in the near term.
On a strategic note, investors should continue to maintain intermediate-to-longer-term bullish exposure to the stock market via ETFs and outperforming individual stocks in strong sectors, most notably the retail sector. I also recommend raising of stop losses on existing long positions among the actively traded tech and Internet names, as well as taking profits in stocks and ETFs which have already had impressive upside moves.
Cliff Droke, Momentum Strategies Report, www.cliffdroke.com, 707-282-5594, August 4, 2018
Moving Higher, but Don’t Forget Stops
Last week, the market (the DOW) was able to keep from closing below the critical 25,250 level and moved up strongly on Friday. We believe that the market is headed substantially higher because it came out of a Head & Shoulders Reversal pattern, tested the neckline on Thursday and moved back up on Friday. We would still continue to have stop loss orders 10% below the market in view of the North Korea situation.
Joseph Cotton, Cotton’s Technically Speaking, www.cottonstocks.net, 727-289-4436, August 6, 2018
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The next Wall Street’s Best Dividend Stocks issue will be published on September 12, 2018
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