As I mentioned last week, it's August, so what did you expect? It was only a few weeks ago that the stock market was very overbought, and many of our Psychology indicators had moved into zones that we consider the "red" zone when the dumb money was getting a little too euphoric and the smart money was getting nervous.
Fast forward a few weeks since we had that very overbought market, and now we see this.
The stock market is now oversold. That is good, of course, but as we look at our stable of favorite indicators, we still see only grudging improvement - not the type that usually supports a re-emergence of a bullish trend.
We think the stock market has been in a correction (deteriorating breadth) for several months. We are encouraged that some of the leading growth stocks are resisting further declines, but we'll continue to remain relatively cautious on the short-term until the body of our Psychology indicators tell us enough "worry" has crept into the stock market.
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