Indicators Still On Yellow Alert
Summary
- There were stellar earnings reports last week, but the market was expecting those and sent shares of many of those companies lower.
- Federal Reserve Chair Powell spoke mid-week, and the market passed on its usual fireworks in response.
- While there has not been a 5% decline in market averages, there has been a stealth correction going on underneath the surface.
For a week marked on the calendar for some time as a potentially busy week, it was a bit of a snoozer. There were stellar earnings reports, but the market was expecting those and sent shares of many of those companies lower. Federal Reserve Chair Powell spoke mid-week, and the market passed on its usual fireworks in response. It seems as though most market participants are at the beach.
July marked the 6th straight month of increases for the S&P 500. The market has now gone 185 days without a 5% decline. That is one of the longest periods without a 5% decline in the last 100 years.
While there has not been a 5% decline in market averages, there has been a stealth correction going on underneath the surface. According to JC Parets at All Star Charts, the average drawdown from its highs for a stock in the S&P 500 is 8%, while the average stock in the NASDAQ is down 18%. How can this be? The largest of the large-cap stocks are holdings up the averages. According to JC, he is not waiting for the correction. The correction is already happening.
The next six weeks may be critical. August and September are the worst one-two punch on the calendar, and we expect market returns to mimic prior years. However, our indicators are still just on yellow alert.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
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