Friday, July 8, 2016

As of Friday, July 8, 2016 at the close of trading EquitySurge™ has generated a buy signal for USA equities.

The stock market soared higher today from open after the Employment Situation Report beat expectations by an enormous margin. The S&P500 Index climbed more than 30 points and closed around the 2130 level, just under the all-time-high of 2134.

More importantly, liquidity indicators soared even higher, further confirming massive money flow into equities. This bodes extremely well for much higher highs for stocks over the coming days and weeks.

However, USA 30 Year Treasury Bonds after initially selling off (prices down, yields up) turned up again and closed back near their recent high prices and low yields. As mentioned before something is going to have to give with stocks at all-time-high prices and long bonds at all-time-low yields at the same time. This is an unprecedented phenomenon that will resolve at some point.

Our expectation is that the resolution will be bond yields rising which will drive bond prices lower while stocks continue to climb higher.

Because we are in the midst of this strange occurrence of extremely low bond yields along with all-time-high stock prices, we could continue to see elevated volatility in stock market prices. The key point here is to view stock sell-offs, price drops and weakness as excellent opportunities to add to existing long equity positions.

Until such time as liquidity indicators tell us to no longer own stocks because money flow into the equity market is slowing, buying dips in the stock market and building long positions is the best strategy.

If you would like to review the EquitySurge™ trading signals generated so far in 2016 please see the Trading Signal Performance Chart page.

2 thoughts on “Friday, July 8, 2016

  1. “Our expectation is that the resolution will be bond yields rising which will drive bond prices lower while stocks continue to climb higher.”

    based on what? I tend to think the opposite in the very short term. Not saying doom&gloom, just think a rejection of the ATH is more likely than not.

    1. The ATH will likely get rejected initially, and maybe repeatedly, but sooner than later stocks are headed much higher. The reason is surging liquidity (money flow) into stocks. Long bond yields at these levels are not sustainable, and large commercial traders are at their highest net short position EVER! All it’s going to take is the right catalyst to pop this bond bubble and stocks will soar as a result.

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