As we ping back and forth between the summer cool down (w/ potential liquidation) and the view of a resumption of the inflation trades I want to make a point here that trends in US stock markets are intact. While I tried a short on the small caps and there are negative signs within the cycle leading Semiconductor sector, there is a reality still in play and considering its trend, that reality should be respected.
SPX is trending up, not even having violated the 20 day moving average (yet, anyway). That MA corresponds with short-term lateral support around 4420.
Dow is trending up and is in the same situation at its EMA 20 (35,134).
NDX has a rolling look to it and looks due for a test of the firmly uptrending SMA 50. But note the word “uptrending”, as with the SMA 200 as well.
SOX will be instructive. It is still considered at support as it pokes the SMA 50. As noted in NFTRH 668, it is at what would be considered a buy level here, all other things being equal. I’d continue to watch the SOX as the leading edge. A lower low to the July low of 3088 would be a signal for a US market correction with some bite to it. As it stands now, despite the negative divergences of the Semi sector’s nuts & bolts, it’s technically normal and on trend.
Short-term liquidity issues appear to still be in play (ref. USD & Gold/Silver ratio). But nothing – including the failure of the inflation/reflation trades – is confirmed yet. The US stock market is in a major uptrend and we should evaluate what happens at the major trend markers – the SMA 200s – before we get too excited (or concerned, as the case may be) about a big time bearish event.
We anticipated a “summer cool down” (SCD) and it is here. But I do not want to be played by my own SCD theme. I believe the Fed has desired the cover of weakening inflation signals and possibly stock markets as an excuse to either not take its foot off the gas (not taper) or possibly even to add new inflationary operations to the mix. We’re in a much different market now than we were at peak inflation hysteria in the spring.