Stock Market Weakness in July

UPDATE 7/21/09: Looks like the market confirmed a positive market mood signal Monday, wiping out the previous negative signal. It'll be interesting to see if this new rally has legs.

Of course, sidelines and cash is where to be now if you're playing short-term swings, as RSI has peaked north of 80 in recent days. This indicates a overbought market.

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Hey! Finally some stock stuff to talk about.

Based on my trading tools, short-term market mood has turned negative after an incredible run-up over the past several months. If you timed your buys right and unwound positions into strength, you ought to be pretty happy right now.

What I normally do when I see a negative market signal after a long-term positive trend is to unwind excess positions and build up cash. Should the negative trend persist, I'll have cash on hand to buy into the next dip. I certainly would not buy anything for at least the next 15 days.

But what to buy? If you use a growth/value valuation model like I do, you might be hard-pressed to find promising leads. That's because my model has screened out a lot of stocks that I used to track because the economic downturn has hurt their year-over-year growth percentages. But I'll save that for a future discussion down the road.