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The S&P 500 was choppy last week as resistance was held. The bulls did have enough energy to pull off a .55% gain for the week, but it was not enough for a buy trigger. It was more of a neutral week for the S&P 500 after it was all said and done by the close on Friday.
The bulls see a bull flag in the recent price action while the bears see the current resistance as a lower high. Of course, like always, either of them could be right. When we bring the underlying breadth into the picture (number of stocks participating with the index advances and vice versa), we see a negative reversal which is bearish. The bulls really want to see a strong break to the upside this week if we are going to quickly test the highs. The longer prices meander sideways, the less likely they are to break in one direction or the other.
Bull / Bear Market
Both the S&P 500 and MSCI All World (ex-USA) Index are greatly outpacing treasuries at this moment. That puts us in a ‘Risk On’ stance when it comes to the longer-term trend. The S&P 500 is slightly under-performing the All World index so we remain focused on looking for opportunities in the international markets.
The swing indexes we like are the following: United Kingdom / Japan / Oil / Extended Treasury / Australia / Brazil / International Government Inflation-Protection Bonds
Almost all the indexes above were up for the week. Of course, some better than others, but the big winners were Brazil and Oil. We ended up taking some risk off the table with Canada. None of the indexes we had planned on getting involved in last week triggered a buy. They were close, but no cigar.
This week could be a big week as we have four indices we are considering if the triggers are hit. They are Natural Gas, Switzerland, MSCI EAFE Value, and the Preferred Index.
We are starting the week once again at resistance. A bull and bear case is easy to build. I’d say the bulls have the slight advantage when it comes to price action, but the breadth is signaling a more bearish slant. Either way, we will continue to follow our plan of buying when the triggers are hit and selling when the stops and targets are hit. We will be watching all the positions and price action closely so that we can take the appropriate action regardless of market direction.
The Education/Gratitude Book Club
This month’s book is “Intentional Thinking: Control Your Thoughts and Produce the Results you Desire,” by Dale East. A couple of weeks ago, I read the first and most important exercise he suggests is to hold a positive thought for 15 seconds and be able to do this on demand. I have to tell you I failed miserably as I didn’t remember to do it more than once! OK…so what I just did is set a very soft, gentle reminder on my watch to remind me every 60 minutes. The alarm goes off, I give it 15 seconds. Knowledge without action is useless, right? Have a great week!
Adam Straseske, CMT