S&P 500 Slides to Short-Term Support

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The S&P 500 finished down 1.24% for the week after the dust settled. All said, the S&P 500 was down for the week, but it wasn’t too wild of a ride. The index basically traded down in the beginning of the week and then traded flat for the remainder of it. There was a breakout on the S&P 500 on Tuesday, but it failed just about immediately.

Bull / Bear Market

Both the S&P 500 and the All World (ex-USA) indices are holding greatly above treasuries. The S&P 500 is holding stronger than the All World Index telling us to focus future endeavors on the US Equity Markets for the time-being. That is why we sold out of some International holdings and started with Large Cap and Growth as a replacement. The spread between the two is about 3.5%, which mainly took place about two weeks ago. The two indices are relatively correlated to each other at the time being, but we want to watch closely to see if that spread widens and of course participate in the one that is leading on a 12-month rolling basis.

Index Swings

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 above indices were down slightly or slightly up. Oil was up as well as Treasuries. Treasuries have held in this area of support for about six weeks and finally starting to show some life. I don’t like it when they go down to support and just sit there…I like it when as soon as they smell support they bounce like a rocket. That type of action is much more bullish than what we are seeing for treasuries. Doesn’t mean they can’t rise from here, it’s just not the type of action a bull likes to see.

The rest of the indices were down just a tad for the most part. Brazil had a shot to make some news last week with a new high, but it failed. Overall it still looks bullish as it is still above the longer-term moving averages and still relatively close to highs.

This Week

The S&P 500 failed this past week, but found at least temporary support on Thursday last week from a strong break up in price from Friday of the previous week. It has basically filled a gap in prices. There is a buy signal from Friday on the daily time-frame, but it is definitely weak. The FOMC meets this week and the minutes are released Wednesday at 1:00 p.m. central. The consensus is a rate increase of a quarter-point. Furthermore, New Home Sales numbers are scheduled for release on Friday. Both could be drivers of market action.

We don’t have any new items for consideration this week as many of the markets we follow are still in this current trading range and/or broad bull channel.

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 am enjoying the book and learning some new techniques on how to read faster…for example, instead of reading each word individually, learn how to read a sentence in a glance. He suggests starting with two words at a time and moving up to a sentence as you get better. Have a great week!

Warm regards,

Adam Straseske, CMT

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