S&P 500 Stalls in Trading Zone

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The S&P 500 finished the week down .13 percent. The index didn’t finish on the lows for the week as the bulls pushed hard on Thursday and if not for Friday’s negative action, it would have finished slightly up. The index has once again appeared to enter into a trading range. The range is approximately from 2545 to 2595. Each time the index has entered into a range since the beginning of this year, it has broken to the upside.

When I talk to other investors, many seem to be looking for the next shoe to drop and the markets to go into a deeper correction rather than a trading range. The trading range is relatively tight as was the rally up. This gives more credence to the bulls at this point, but it could quickly be changed by a series of lower lows. Until then, the bulls are in charge.

The All World (ex-USA) Index is still outpacing the US S&P 500 Index by about 3% on a 12-month rolling basis. This is why the heavier focus on international markets. The important part according to a risk perspective is that they are both greatly outpacing treasuries. Until that relationship changes, we are holding a more ‘risk on’ stance.

It is a relatively light economic week as the big news for the week is the Federal Open Market Committee detailed meeting minutes for release on Wednesday at one o’clock central. The breadth of the market has continued to decline, but looks as if it might have come to a temporary bottom as it has increased slightly since the drop in the markets on Wednesday. Over the past many months, each time breadth has declined this much with meandering prices, the index has gone up and breadth has followed. We shall see if the bulls can continue this pattern.

We are looking at building a little more in the preferred stock arena as well as possibly Brazil and International Government Inflation-Protected bonds. The long-term trend of the S&P 500 is up while the short-term is sideways. All this along with a short trading week should make it very interesting! Have a great Thanksgiving!

by Adam Straseske, CMT

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