Stock Market Week in Review

The stock market has moved into a trading range. All three major stock indexes had a bearish climax on May 18. They dropped below the bottom of the trading range on June 1 only to return four trading days later. This is a bullish sign of strength. But remaining overall defensiveness has put the DOW higher than the S&P or Nasdaq.

The “reason” for the down turn and ensuing trading range is,  simply, that the Nasdaq ran out of steam. It had reached the aggressive target from its former trading range last summer. The current TR is needed to refuel. The longer the current TR lasts the longer will be the future gain (i.e., I believe the TR’s bias is bullish).

Stock sector analysis provides a more detailed picture. The cyclicals group is under performing consumer staples but our graph of overall graph of strength (cyclicals) versus weakness (staples)” shows cyclicals beating the consumer staples. Another bullish signal is the rebound of Semiconductors, Computer Software and Telecommunication Services following weakness last month.

It is still too early to take a position in stocks.

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