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Date: July 25, 2016

Stocks Coiled Up for a Move

Good Monday Morning!

If you looked for me on FOX Business last Friday, I wasn’t there as the attack in Germany meant more geopolitical news and less market discussion. My segment was rescheduled for 2:50 pm this Wednesday which is right after the Fed concludes their meeting and announces no change in interest rates.

There’s not a whole lot new today to review. Stocks remain very overbought, but an awful lot of investors are looking for that pullback to buy. Having been in that position more than a few times in my 28 year career, it can be very frustrating. Thankfully, it’s not something I have to worry about right now. I can find other things to bother me!

Heading into the new week, the major stock market indices are “coiled up” as my friend Tiny would say. That means they have traded in a narrow range after a big move and they are building up energy for a good move. The best example of this is with the S&P 400 as you can see below and the Russell 2000.

Coil

While the this coil looks to be very bullish with an upward resolution, given how overbought the stock market is, I would be on the look out for a possible move to the downside first. That could shake out some weak handed holders and then immediately reverse and break out to the upside. All speculation at this point so we will watch it closely.

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Author:

Paul Schatz, President, Heritage Capital