The S&P 500 finished the week up .61% after it was all said and done on Friday afternoon. It’s like there is no gravity to the S&P 500 right now. The trading for the past 9 weeks has been pretty darn close to vertical. This type of price action is called a tight bull channel. It’s important because typically (not all the time, but typically) a pullback after a tight bull channel is not a reversal of trend to the downside without at least some sideways movement. Said another way…the market typically needs to work out some upwards inertia before reversing the trend.
The monthly momentum, which is our last line in the sand for the warning of a bear market held positive for this week. The signal, or final reading, does not close until the end of each month, but unless we see a pullback of price of at least 2% for the week, it will more than likely close positive.
All of our positions this week showed gains with the exception of the US Dollar. It was down slightly but still holds above support. Our technology and emerging markets positions fared best for the week and both continue with their positive (bullish) price action.
The practice of investing can be broken down into four broad areas of study. The 3rd one is Executing Your Investing System Flawlessly. Of course this is important as I’ve seen more often than not acceptable strategies that were simply not executed correctly. If you use a mechanical system (which we do in part), it means following it and detaching yourself from the outcome. This is one of the most difficult things to do when it comes to investing because of the emotion involved and our desire as humans to be ‘right.’
The bottom line, vigilance and strict adherence to the plan is critical. In closing, we are still in a cautionary bearish stance on the longer-term monthly view and overall the S&P 500 is in a sideways trading pattern. We will continue to hold our current positions and wait for a solid sell signal or strong break to new highs before adjusting our stops up. Have a great week!
Adam Straseske, CMT