stock market analysis august 2014

Top Down Stock Market Analysis August 2014

Here’s a little top down stock market analysis for you, heading into August 2014. To be honest…

I don’t often find this kind of big picture down analysis that helpful. But it’s interesting to think about every now and then. So for the fun of it, here are some thoughts on the top down fundamental and technical picture going into August…

August 2014 Top Down Stock Market Analysis:

  • The Dow Jones Industrial Average has been under the 20 day moving average for a couple of days. And it’s now on the 50 day MA.
  • Previously we talked about a potential homebuilder recovery in 2014. But that seems to be a myth. Just look at the chart of XHB heading into August.
  • Amazingly, US GDP printed 4% growth heading into August 2014. While this might seem like good news, will it cause the FED to raise interest rates sooner? Wall Street logic isn’t always intuitive.
  • The US dollar is absolutely spiking. Pull up a chart of DXY (dollar index) and see for yourself. It looks like it could keep running. This could logically correlate to a draw down in equities. But on the other hand, depending on the move relative to the Yen, the carry trade might not unwind after all. Confused yet?
  • Junk bonds are finally getting hit hard. Is this a warning sign of things to come? Or could it be that investors are getting more cautious and just asking for higher yields in riskier issues.?

As you can see, it’s easy to muse about all of the confounding factors influencing the stock market, heading into August 2014. But drawing a firm analysis is much harder. Personally, I prefer to focus on what’s within my control and not get too dogmatic about correlations or macroeconomic implications.

Find good companies and trade them well. Simple as that.

And By The Way: If you’re curious about my focused approach to the stock market, I encourage you to download my eBook free below this blog post. You’ll also get weekly updates with some of the best tips and tools to help you improve your approach to the stock market. 

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