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The S&P 500 finished strong on Friday to help post a weekly gain of 3.54%. The S&P 500 closed pretty much on the nose of where it finished it’s last leg up so it is coming into Monday at resistance. The bulls are seeing a double bottom and looking for a continued advance while the bears see a bear flag. Both are valid (always a bull and bear case…). Friday was a strong finish to the week, so we’ll see if they can hold on and push the index further on Monday.
Bull / Bear Market
We are still on a risk on stance when it comes to the longer-term momentum of the S&P 500 and the All World (ex-USA) indices. We rotated out of the All World position and got involved with US Large Caps and US Growth since the S&P 500 started to outperform on a 12-month rolling basis. We want to be in the stronger markets. The main point of this is to participate in bull markets and get out of the way of bear markets. Both indexes are in bull markets.
The swing indexes we like are the following: United Kingdom / Japan / Oil / Extended Treasury / Australia / Brazil / International Government Inflation-Protection Bonds / EAFE Value
Most of the indexes look healthy with the exception of Treasuries. They are still hanging around on support, but it’s not good that they are not bouncing strongly in this area. We are watching closely to see if we can get some positive action or if negative take action. We’d like to see protection in this asset class, but the rising interest rates are certainly taking their toll on prices…especially the interest rate sensitive asset classes without much dividend risk (i.e. – treasuries). All the other indexes finished relatively strong with Brazil being the strongest. It is very close to new recent highs.
As far as additions, we got a good buy signal last week in Global Natural Resources. It has pulled back and bounced a second time on support. Assuming we get a trigger, the stop is relatively tight.
Many indices signaled a buy signal last week, but most still have some work to do in order to make new highs. However, we are still in this broad channel and larger trading range. Furthermore, breadth favors the bears as there is a negative divergence on the shorter-term oscillator and a slight negative reversal on the longer-term. Neither is obvious, but could be interpreted as such depending upon how you view the data.
It is a pretty big economic week with Housing Starts, Producer Price Index, and Consumer Price Index numbers all scheduled for release. So we will see if we can get a strong push to the upside. If so, it may be the start of another leg up to new highs or at least a test of the highs. Alas, only time will tell…but we will be watching closely and taking the appropriate action(s).
The Education/Gratitude Book Club
This month’s book is “Learn like Einstein: Memorize More, Read Faster, Focus Better, and Master Anything with Ease…Become an Expert in Record Time,” by Peter Hollins. I just received a copy in the mail, so I haven’t done more than scan through it, but it looks like an easy read. I hope to get a lot of reading done this week during Spring Break and learn to learn like Einstein (I think it is a stretch…)! Hope you have a great week!
Adam Straseske, CMT
H.I. Bull/Bear Report
The Report Focuses On...
Whether the S&P 500 and All World (ex-USA) Indexes are in Bull or Bear Markets - Tells you whether or not the monthly trend is rising or falling.
Other Markets - A quick look at some of the different asset classes and market styles we like according to trend and momentum.
Useful Investment Philosophies, Tips & Tricks - Grow your mind and grow your portfolio.
Don't ever get caught flat footed by a bear market. Pay attention to what is happening and take advantage of the trend. Gather the fruit not study the root!