The Weekly Economic and Stock Market Commentary – July 19, 2021
As for the stock market specifically:
The major market averages finished the week with a loss for the week. I don’t remember how long it has been since I said that. Last week was the beginning of earnings season, those with a good memory will recall that last week I’d said something along the lines of (paraphrasing) “things may get a little bumpy”. Well, maybe an air pocket was more like it.
There were some important developments in market composition and the overall strength of the markets.
The percentage of stocks in a positive trend changed in such a way that the last 6 percent of net changes were to downtrends.
Think of a downtrend as taking a car from Seattle, WA to Miami, FL.
In stock terms, a downtrend is a series of stocks making lower highs, and lower lows, and is large in amplitude.
Overall, we still have more than 70% of the stocks in an uptrend, but the risk is getting greater.
A second development is that less than half the stocks on the Nasdaq, and nearly one-half the stocks that are optionable, are on sell signals. That means that fewer stocks are carrying the market.
It was another week where each of the bullish percent indicators fell by at least 3 percentage points. WEALTH PRESERVATION strategies remain in effect.
Remember, Xs mean OFFENSE or wealth accumulation, while Os mean DEFENSE, or wealth preservation.
Below is where our indicators stand as of July 16, 2021 (Courtesy Dorsey, Wright, and Associates).
On a general note:
The Department of Labor announced June consumer prices rose by 5.4% compared to June 2020. That was the largest change in prices since 2008. The core rate of inflation, which is what you experience if you don’t eat or use energy, rose by 4.5 %. Prices rose 0.9% when compared to May 2021. Prices rose in nearly all areas that are measured, so there isn’t much room to blame a particular sector. The Federal Reserve believes this is a “transitory” event, and we will get back below 2% inflation soon.
The Commerce Department informed us that June retail sales rose by 0.6% compared to May numbers. People spending in bars, restaurants, and clothing stores led the way. People slowed their spending on furniture, sporting goods, and home improvement. The report noted that retail sales now are 18% above the levels set in February 2020, before the virus shutdowns.
The Treasury Department brought us a report on the budget deficit for the first 9 months of Fiscal Year 2021. The deficit came in at $2.2 trillion dollars. This is a bit better than expected. Spending rose by 6% compared to that same point in time of Fiscal 2020. However, and don’t let our elected officials in on this, revenue rose by more than 35%.