Two weeks ago, the NASDAQ was 18,429 and the S&P 500 was 5,576. I wrote that it was a good time to take profits. Today, the NASDAQ is 17,181, down 1,248; and the S&P 500 was 5,576 in my post two weeks ago. Today it closed at 5,399, down 277 from when I mentioned taking money off the table. The institutions are currently sellers of big names and NOT BUYERS. Be wise; do what they do! It was a bad day for both. The day started out strong but selling insured in afternoon trade. (a terrible sign) Selling volume (above average daily volume) increased again. The signs are there. Currently, there is no silver lining in either exchange, but they may get a relief rally if the Federal Reserve lowers rates on July 31st or if his statement points to a dovish stance on interest rates moving forward. And if that rally on either exchange occurs, I think it will be short-lived, in my opinion. I don’t see the NASDAQ closing above 18,130 or the S&P 500 closing above 5,565 in the next 90 days and maybe more. I will revisit those levels later. Currently, both markets on a chart basis, look like they will continue with lower highs and lower lows. Which indicates to me that institutions are sellers into strength, not buyers. And you should do what they do if you are looking to protect profits!
But there is a shining star!
Again, as I mentioned 2 weeks ago, if you are a trader, the place to be trading is the small-cap market currently, that is where the money is flowing. (I have said now for 2 weeks.) While both the NASDAQ and S&P posted losses yesterday, the small-cap index posted a gain of 1.26%. Currently, this is where the money is flowing. Don’t go against the trend. Remember, the trend is your friend! I don’t know how long the small caps can carry this index forward. Maybe throughout August? But what they currently have working for them in the near term is money flow and the potential lowering of interest rates. What they have working against them is the season, the election, a Federal Reserve that is too data-driven, where a blip on the inflation screen (which we saw earlier this year in the service sector) could change his stance on interest rates overnight and finally, a potential train wreck in the economy moving forward, which I see as real risk if the Federal Reserve does not lower rates immediately. Watch what companies are saying for second-half projections on growth. It will give insight to what the economy is doing and what to expect for the market in the last few months of the year. (I will revisit this in a post later.)