S&P 500 Bulls Take Profits

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The S&P 500 let off some steam this past week with a decline of 3.85%. I don’t know if the bears are committed to shorting in mass at this stage, but it surely seems the bulls took some profits last week. Yes, the S&P 500 was down this week in a sharp fashion, but it was not down far enough to turn the trend or break the bullish structure of the S&P 500.

Bull / Bear Market

The S&P 500 and All World (ex-USA) Index are still greatly outpacing short-term treasuries despite the slip in prices this past week. The weaker of the two indices, the S&P 500, is still outpacing treasuries by about 16% on a 12-month rolling basis. That is a lot of room to move around. It certainly doesn’t mean that the markets would have to fall that much to take action, it just shows how far the equity markets have advanced over the past 12-months. Since the MSCI All World (ex-USA) index finished stronger this past month, we will remain primarily focused on international markets.

Index Swings

The swing indexes we like are the following: Canada / United Kingdom / Japan / Oil / Extended Treasury / Australia / Brazil / International Government Inflation-Protection Bonds

There really wasn’t anywhere to hide last week when it came to the selloff. Most markets were down at least over 1% and many were down much more for the week. We were hoping to get a buy trigger in treasuries last week, but it did not happen…treasuries continued their slide downward. Furthermore, most fixed-income vehicles continued their downward trajectory.

The end of the month last week did not bring sell signals when it came to equities, but many of the fixed-income vehicles brought sell signals on our monthly trend signals. Those of you that get 401k updates probably got an email about it…if you even had any fixed-income (For example, bond funds) funds left at all.

This Week

Last week we talked about possible exhaustion in the markets. It looks like that was the case as this past week was a brutal one for most markets. However, with the exception of a few, there was no structural damage (trend change) done. This means that in the weeks to come, we are thinking that we will at least see some sort of test of the recent market highs. Of course, we don’t know if this will happen as uncertainty is the only absolute when it comes to the markets, but equities have been so strong that we would expect upside pressure to come back into the markets. Like we talked about last week…a rolling action, not a consistent sharp move down that lasts for the next several months.

No buy signals were generated last week which would put us at least a week out on any new signals. The way it works is that we get a buy signal, then a ‘trigger’ signal. This past week was full of sell signals so if the markets continue to slide this week, we would see ‘sell triggers’ on the weekly scale. Again, this is OK and depending upon the depth of the move, may not ruin any bullish structure on the longer-term.

It is a pretty light economic week, but we will be watching market action closely to see if the bulls reignite their willingness to bid prices higher.

The Education/Gratitude Book Club

We are now officially in the 2nd month of our Education/Gratitude Book Club. This month’s book is “Intentional Thinking: Control Your Thoughts and Produce the Results you Desire,” by Dale East. One of the most difficult parts of investing is consistently following the laid out plans. It’s kinda like hearing Mike Tyson’s quote, “Everyone has a plan until they get punched in the face.” The point is that when investing, you absolutely MUST be comfortable with all outcomes. The more you pay attention and understand price action, the more scenarios you can see in the future which will make you more comfortable. Of course, in order to do this, you have to have your head on straight! Hopefully this book will help strengthen our straight heads!

1st three people to email me they want a copy will get a complimentary copy…gotta be quick! Have a great week and don’t hesitate to call/email me!

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