The S&P 500 has seemed unstoppable over the past many weeks as the index has risen just about every week since Mid-August. This past week, the S&P 500 finished down .21%. There is no doubt that the index is losing steam, but after a strong run like the one we just had, you have to think that the bulls will step in at a lower price and buy back in to at least test the recent highs.
When it comes to the longer-term trend and bear market territory, we are not even close. Both the S&P 500 and All-World (ex-USA) Index are greatly outpacing treasuries. Until we see weakness compared to Treasuries, we are looking at more of a risk on stance.
The risk of a correction has been building over the past many weeks simply because the number of stocks participating in the recent advances has been declining while the index has risen. This shows that the internals of the market are weak compared to the S&P 500. The question has become whether the winners will drag the losers up or will the losers pull the winners down. This week is a pretty big week for economic data. The Producer Price Index, Consumer Price Index, and Housing Starts are on the schedule for this week.
The long and short-term trend of the S&P 500 index is up right now. There were not a lot of buy signals that were created last week from the indexes we closely follow. The most interesting one we are looking at this week is the possibility of International Government Inflation-Protected bonds. They are sitting on support from a previous buy signal after posting a new relative high. Most current positions have a relatively far stop or second purchase area. Have a great week!
by Adam Straseske, CMT