Hard to believe 2017 has come and gone. I can tell you that personally, I have had some great success along with some failures as I look back and reflect on the year. When it comes to 2017 and the stock market, if I was forced to sum it up in one sentence, it would be, “markets run longer than anybody thinks.” Moving forward into 2018, if there is one thing that I’m excited about when it comes to “work” (although it doesn’t feel like work to me), it is the enjoyment and interest in the markets. There is no doubt that we are interesting times!
Right now the prognosticators are (and have been) giving what could be the reasons why the market topples over from this run up in price. The reasons range from a collapse in bitcoin that spills over into the equities market to a severely more daunting prospect of war with North Korea. Although I can admit it is entertaining to talk about what could cause a turn in the markets, it is more important to notice one is happening and take action. The dirty secret that we know is that the markets will turn because buying pressure has been exhausted and selling pressure will accelerate. Of course, we will be able to blame it on an event for the sake of discussion, but we will know that a reason is pegged after a move and NOT before.
So what are we to do about this spectacular rising market? Easy, follow the plan. The plan is to continue to be bullish on the market in general until treasuries start to outpace the market on a 12-month rolling basis. The second part is to focus on either the international or US markets depending upon which one is stronger. The third part is to control risk through position sizing, multiple purchase prices, and strategically selected exit strategies for the up and downside.
So right now, the S&P 500 is being outpaced by the All World (ex-USA) index. Many of the international markets have made relative recent highs in the past week. This is good news for the bulls! Almost all the stops are pretty darn far from current prices and that puts our second purchase price range a good distance away as well.
The breadth of the US market has slowed. Last time the S&P 500 was in this position according to breadth, the S&P 500 basically churned sideways. The S&P 500 made an all-time high the week before last, so we will probably need to see a larger test of the high before a meaningful degree of selling pressure ensues. Of course, anything is possible (possible and probable are not the same)!
This week we don’t have any additional purchases planned. Some cash is available, but it would be used up quickly if one of the second purchases lined up. But if there is one thing that I want to tell you, it is happy 2018 and make this your best year! Decide what you want and work on it…every single darn day!
Adam Straseske, CMT
PS – Gratitude and Education are two things that very much resonate with me. I’m very grateful for all those I’ve been blessed to know. When it comes to growing as a person and having the ability to help others, education is a big part of it. So, I’ve played around with this idea off and on over the years and it is now time to actually implement it. I’m sure it will change over time, but right now, as it stands, this is my best attempt to incorporate gratitude and education in one fellow swoop. So here it is…each month I’m going to pick a book, announce the book pick, read it, and do my best to break down the biggest findings within a paragraph from the past week of reading. As you might guess, many of the books I plan to read are about the markets, but not all of them. I’m also very interested in self-development books, biographies, and general business. The reading is obviously the education part…the gratitude part is this…at the beginning of the month when I announce the book, if you want to read it, email me and let me know you want to read it. I will buy a copy for the first three individuals that email me they want to read the book. The first book of the year is going to be hard…no, probably closer to impossible to beat when it comes to good books so we will start the year out with a bang! This month’s book is “Man’s Search for Meaning” by Viktor E. Frankl. Email me now!