Markets were resilient, defying skeptics (yes, including me), as a surge at month end erased most of the month's losses. Metals of all types: rare, precious, base and industrials melted up, suggesting that the economy is getting stronger, confirmed by a stronger GDP reading (and hence, the smart money rotated into growth). However, breadth continues to lag across time frames, and that divergence will have to be resolved at some time in the future.
Chart 1: Markets rebounded into the neutral region in the short- and intermediate-term, and remained firmly long over the long-term. At the intermediate-term (100-day length) the financials-laden Russell 2000 now is trending lower, diverging with the other indexes. Index breadth increases from left to right, from 30 to over 2000 stocks. The time frame doubles at each step from to top to bottom from 25 to 200 days. (Details of the trend-following models are here.)
Continue reading "August 2017 Review, Plus: Metals Melt Up, Smart Money Rotates Into Growth, But Price:Breadth Divergence Continues" »