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Market Outlook

The popular averages closed to the upside on Friday amid light pre-holiday trading volume. The S&P 500 achieved an all-time closing high. The August Chicago purchasing managers’ index accelerated significantly. August consumer sentiment increased more than expected. However, consumer spending declined in July. Meanwhile, the price of crude oil rose while gold fell on Friday.

   In the American automaker sector Friday, General Motors (GM +0.3%) rose with no significant news. Ford (F -0.1%) pulled back a penny after announcing it will close production for nine days in Romania due to weak European demand. Tesla Motors (TSLA +2.2%) attained all-time intraday and closing highs, after reaching an agreement with China Unicom to develop a network of 400 free charging stations for Tesla cars in 120 cities in that country. They will build Supercharger stations in twenty Chinese cities.

   Above is my 3-month chart of the S&P 500 exchange traded fund (SPY). It was soaring in February following a January pullback. After a new high was recorded in early April, another drop occurred as newsletter writers were warning people of a bubble that could burst. That April drop beneath the 50-day moving average was quickly erased. Money moving out of stocks and into bonds led to more tests of that moving average before a nice rise to record highs commenced.

   The down-thrust amid high trading volume on July 31 shoved the SPY beneath its 50-day moving average. That caused my outlook arrows to briefly retreat to neutral. During the first week of August the price move alternated each day with the net result a slight gain and repainting my weekly arrow green. On both August 14 and 15 the SPY closed virtually at its 50-day MA. That allowed my monthly arrow to join my weekly arrow. The sharp move above that level on August 18 sounded the all-clear for all of my time frames.

DISCLAIMER: Our commentaries are provided as general information and not investment recommendations. You are responsible for your own investment decisions. Our opinions are based on historical research and data believed to be reliable. There is no guarantee that results will be profitable. We are not responsible for errors or omissions. We may hold positions in vehicles that are mentioned.

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