Three out of four major indexes are trading at new highs, Russell 2K is lagging.

The SP500 e-mini futures market rallied this week and it looks like the bulls want July to be the 6th consecutive bull bar on the monthly chart when the month ends on coming Friday. That has not happened in 10 years.

Use your mental inherent power - MEMORY

 

A sign of risk in the market.

"If you have trouble imagining a 20% loss in the stock market, you shouldn't be in stocks."

"The market is currently in an uptrend. That could change at any moment and I would put a 70% probability on the S&P finishing the year higher than current levels. At the same time, a break below the June low would suggest a 50% chance of a retest of the 2021 lows, and a 5-10% chance of a 20-30% decline."

The market moves in probabilities. It's all about what's most likely to happen, but it's also about what could happen.

"Pilots are taught to always be ready for emergencies. And you prepare for the unknown by simulating engine failures and mechanical issues. Then if you actually experience an emergency during a flight, you've already planned out your course of action."

Losses happen. Even if your analysis is spot on, and your thesis is well-articulated, the market can move against you.

The key is to be ready for emergencies in your portfolio. Have a "line in the sand" clearly defined for any new position.

"The elements of good trading are: 1, cutting losses. 2, cutting losses. And 3, cutting losses. If you can follow these three rules, you may have a chance." On the opposite side is selling into strength and taking profits, and you can consider doing it now with your extended stocks.

The "pros" were bearish at the bottom and now everyone is bullish. Keep you opinions in check and let the stocks dictate your course of action.

 

"You don't need to predict how everything will play out. Just master the next step and continue moving in the right direction."

What is wealth ?

https://www.youtube.com/watch?v=RMr504P0GPM

When a rising tide doesn't lift all boats it makes me wonder if there's a problem with the boat.

Equities are enjoying a bounce led by some of the beaten-down parts of the market of late namely the Dow industrials, transports, small caps, energy, banks, and materials. Tech is showing relative weakness, as bonds run into resistance.

This is the standard "re-rotation," musical chairs-type of move we have grown accustomed to, although one I am increasingly skeptical of in terms of sustainability. Still, on a smoky summer Friday it may not be the exact moment for bears to try for a major intraday reversal. Indeed, looking out to next week could easily be the bigger battleground, as we find out whether the recent bounce in bonds was nothing more than a bear market rally, guiding a new regime of higher rates for the foreseeable future.

For stock traders this is the type of market when you let others fight for "hard pennies" while you patiently wait for "easy dollars". Now it's time for patience, waiting, stalking and then when the time is right you pounce.

The FOMC Minutes report is released at 11am PST today.

This could give insight into when the Federal Reserve is going to cut back on its monthly bond-buying program, which has been a major supporting factor in the economy and market growth throughout the pandemic. Though the Fed has been hesitant to end the program anytime soon, it has raised worries of how much debt the economy can handle before inflation gets too hot.

"Bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.”

 The market is weaker than the S&P 500 and Nasdaq are suggesting which has been evident in the inconsistency we have seen from stocks trying to emerge from basis. Some are working , but more are not.

UNG - “The world is his who can see through its pretension. See it to be a lie, and you have already dealt it its mortal blow.”

 

In summary, we are willing to give the bullish case the benefit of the doubt as long as SPY continues to close above 410.00.

"If you understand, things are as they are. If you do not understand, things are as they are." It is what it is, people are buying guns.

 

The market doesn’t ignore math forever but it can certainly ignore math for a while.

With the market up and more capital (i.e. money) in the system than anybody knows what to do with, the investing environment is getting tougher.

After 12 years of the Fed pumping money into the stock market, it’s difficult to imagine or remember (depending on how old you are) a scenario where stocks don’t simply go up, or recover within weeks of a dip. Throw in some GameStop and Dogecoin and it seems like investing in stocks will always get us where we want to go.

 

But stocks are expensive by almost any measure, and bonds are not paying anything meaningful. Although expensive stocks can get more expensive, math tends to win over long periods of time.

 

A popular measure of the “expensiveness” of stocks is the Shiller P/E Ratio. There is little correlation between the Shiller P/E Ratio and 1- or 2-year returns, but there is a 90% correlation over 10 years. In other words, stock values can’t be used for timing, but they can be used to set long-term expectations.

 

I recently got ahold of a research report from BCA Research, which is a widely-respected research firm that has been around since 1964. Here are some highlights (warning: they aren’t rosy).

“Returns over the next decade will be very low compared to history. We project that a standard global portfolio (50% equities, 30% bonds, and 20% alternatives) will return only 2.9% a year in nominal terms. That compares to a historic return of 6.3%.”

 

“Some assets will produce better returns, most notably small caps (4.9%) and alternatives (6.2% for private equity, for example). But they also carry higher risk.”
“Returns over the coming decade are likely to be very disappointing compared to history.

 

A US-only portfolio…is likely to produce only a 2.8% return, compared to 7% in history.”
“The reason is simple: Valuations currently are stretched in almost every asset class. The risk-free rate in the US is 1.6% (compared to a 20-year average of 3.1%). It is negative in the euro area and zero in Japan.”

Here is a sample of forecasted returns from the report. The first number is the “Projected 10-15 Year Annualized Return” and the second number is the “Historic 20-Year Annualized Return”.

Investment Grade Bonds 2.0% / 5.7%
High-Yield Bonds 3.2% / 7.7%
Global Stocks 3.1% / 7.0%
U.S. Stocks 2.6% / 8.5%
U.S. Small Cap 4.9% / 9.9%
Emerging Markets 4.3% / 11.1%

U.S. Direct Real Estate 9.8% / 8.2%
U.S. REITs 7.7% / 9.7%
Private Equity 6.2% / 11.1%
Commodities -0.9% / -2.4%
Farmland 6.5% / 12.1%
Timberland 5.7% / 5.7%
Gold 3.8% / 10.0%

50/30/20 Portfolio (US) 2.8% / 7.0%
50/30/20 Portfolio (Global) 2.9% / 6.3%

 

Enjoy waiting for the next move.

We are finally seeing some legitimate concern and, at least, acknowledgment by markets that the FOMC tomorrow afternoon represents some type of risk in terms of the possibility The Fed may hint or outright focus on tapering/tightening. And with a hot PPI number this morning language on the Fed statement and/or presser tomorrow about fairly imminent tapping would be entirely justified. 

Of course, we know with this iteration of The Fed that entirely reasonable actions are never a given. And there are quite a few seasoned investors out there fully expecting the Fed to stay ultra accommodative.

In the meantime, we have a market featuring mostly dipping and squishy action today. 

US$ - at an inflection point. If it rallies, it would be a headwind for equities.

 

Something for animal lovers. Break-out WOOF.

 

Break-out in semiconductors.

 

Looks like there is a slow leak in a housing bubble.