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A Trepidatious Trader


For the first time since 2009, earnings growth for S&P companies has turned negative, which is a significant warning sign.


What are the more concerning sectors that suggest the bull case is not clear? The transportation index is not confirming Dow theory and looks to be breaking down from a set-up similar to WTI crude, which has yet to tip its hand. Lowered guidance by FedEx (NYSE:FDX) and Caterpillar (NYSE:CAT) are contributing to the breakdown. Although the market can rally without them, history dictates that it's not a sustainable move. It should also be noted that the SMH is mirroring the TRAN, and both are breaking down from their respective trendlines of support established in March 2009 and validated in October 2011. It should be noted that semiconductors led the rally out of June and are now lagging.

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The US dollar should be a major headwind going forward as the asset class continues to be debased. Again there is a clear technical picture forming here and it's rather bearish. What we need to be on the lookout for is a bullish shift that negates the bearish pattern and forms a bullish bias, as other asset classes have had the previous 100 days.

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No positions in stocks mentioned.

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