Stock Market Insight: Remain Cautious

In Chris Ciovacco’s latest article he discusses the three European hurdles that must be cleared before he turns aggressively bullish.


Ciovacco states that while Mario Draghi came out with an extremely bullish (for those in the inflation camp) speech last week, we should be cautious before jumping right into the risk trade.


Ciovacco stated:

“Stocks have reacted positively to significant European progress, but firm debt crisis decisions may not come for another six weeks due to the following:

1.    Spain must request formal assistance before any new bond buying program can begin.
2.    The European Central Bank (ECB) is requiring the eurozone’s permanent bailout fund, the European Stability Mechanism (ESM), to be in place prior to taking additional action.
3.    The ESM has been challenged in the German court system with an expected approval not coming until September 12.”


Ciovacco notes that the four most prominent market indicators (from a technical standpoint) are signalling a rising trend. The market has remained above the 50 day and 200 day moving averages. On top of that the slopes of the 50-day and 200-day are positive.


Given the bullish technical signals it is no wonder market participants are getting more bullish by the day. However, until the above 3 hurdles are cleared, proceed with caution according to Ciovacco.


Click here for Chris Ciovacco’s entire article.