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Friday, July 31, 2020

Weak breadth 7/31

The market finished strong today on the back of some well received tech earnings.  However, breadth was -57%.  The market rally has been thin lately.  IWM was down nearly 1% while QQQ was up nearly 2%.  Money keeps rotating back and forth between those two.  Some days when QQQ was down and IWM was up.  Very strange.

We still have one open gap up above.  Will we get up there and close it soon?

The green count is below 50 and slightly below the red line.  The short term indicator is also divergent.

The breadth chart shows the McClellan oscillator was below zero today and has not shown any real strength since early June.  I think I know why.  Look at the USA daily new virus cases chart.

Notice the new cases started increasing dramatically around the 3rd week of June.  I think this data may be weighing on the market at least somewhat.  However, a small handful of stocks like AMZN, FB and AAPL are holding up the entire market.  I also suspect the talk of another stimulus bill in congress is keeping sellers at bay.  Should they fail to pass another bill the market would probably head lower.

Under the covers speculation by individual investors is running rampant.  This is very similar to 2000.  I don't think there is any way to know how much longer that will last.  When the music stops grab a chair quick.  In the mean time, enjoy the rally.

Peace and good health to all.  Have a great weekend.


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