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It was a weak the bulls celebrated until the bears started to step in on Thursday. The bears couldn’t do much damage until Friday rolled around. The good economic data didn’t help, the bears took S&P 500 down for the day, wiping out about half of the week’s gains. So after the closing bell on Friday, the S&P 500 settled for a raise of .61% for the week.
The Bear ‘o’ Meter again stays the same for this week. A couple of interesting things happened this past week…One, the parts of the market that were leading took a back seat this past week as US Large Caps and US Value outperformed their respective counterparts, US Small Caps and US Growth. This could suggest the start of a rotation towards these types of stocks, but it is not enough to change any allocations just yet.
The second is that many international indices have bounced from their lows. If we see a selloff in the US markets while many international markets continue higher, we could get a signal to switch our focus. It will be no sooner than September for this signal (unless something drastic happens early this week) as US stocks are still greatly outpacing the international markets on a 12-month rolling basis. Below is a visual of the bear ‘o’ meter.
The swing indexes we like are the following: Extended Treasury / Australia / EAFE Value / Global Wind Energy / Healthcare Sector / Transportation / Natural Gas / US Aerospace and Defense
The index swing that shined this past week was the EAFE Value Index. It appears to be holding on support and bouncing. This is the most progress the index has made in the past couple of months. If there was a place for the index to hold, it is this area of support. This support goes all the way back to April of 2017 where the index broke out to new highs in spectacular fashion.
The Natural Gas index tried to go higher early in the week, but it could not continue. It was in a great place to break out of the relatively tight trading range and now it looks like it may be headed down to the bottom of the range. If it does in fact continue lower and we get a nice buy trigger, we will look at adding to the position.
Many of the international indices are bouncing from support or a couple or so weeks into an advance. One that has caught out attention is the International Preferred Index. It has had a couple of pushes down and started to move off support. If we get a buy trigger this week, we will want to open a position. We would leave some room for a second purchase if it does in fact turn to the downside.
The bulls have some work to do this week if they want to continue the leg of the S&P 500 higher. It sits in the top 3rd of the large trading range with a high from back in January. They finished the week with a whimper, but were able to at least hold the first level of meaningful support so well see if they can punch through and put a new record high in the S&P 500.
The Education/Gratitude Book Club
This month’s book is “Do It Scared: Charge Forward With Confidence, Conquer Resistance, and Break Through Your Limitations,” by Scott Allan. We’ll have another one for next month. Have a great week!
Adam Straseske, CMT