S&P 500 Falters after Buy Trigger

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The S&P 500 finished down a hair over 2% for the week, 2.04% to be exact. The S&P 500 opened strong on Monday, but the bulls could not hold on and the index slid for the week until Friday. Friday set up a buy signal, so we will see if the bulls can get the trigger on Monday. Over the longer-term, the bulls are still in control and will more than likely want to see at least a test of the high before a lot of further downside. The market has remained choppy and will more than likely remain this way until we see a strong break out of the current range.

Bull / Bear Market

February closed with the S&P 500 starting to outpace the MSCI All World (ex-USA) Index on a 12-month rolling basis. Therefore, we want to start focusing on the US markets. We plan on rotating out of the MSCI All World (ex-USA) into US focused equities. On another momentum indicator we look at, several bear warnings have at least flashed. This just shows the markets have weakened slightly as is obvious from the recent pull back in price. This doesn’t mean the bull charge is over, it could quite possibly only be taking a breather. We will continue to rely on price action over trying to guess market action. It is probability…NOT certainty.

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

Last week was a mostly bearish week for almost all indexes. The strongest index price action for the week was Extended Treasuries and it was neutral at best. We received the buy trigger in the EAFA Value Index on Monday and took it, so we have another swing in play. We’ve also adjusted the stop up on Oil to take some risk off the table. On the longer-term, most of the indexes still look relatively healthy as they have only pulled back within a larger uptrend. There were no new buy signals that caught attention last week so none on the books for new swings this week.

This Week

The S&P 500 and most markets have softened, but the fight for the continued bull market is NOT over. Markets typically don’t fall straight down after such a strong and large uptrend. This has been the case historically. So, we would expect more sideways price action and at least a closer test of the high before a larger trend change to the downside. Of course, the markets can do whatever they want which is the reason we have a process in place using momentum and hard stops to protect principle.

The Education/Gratitude Book Club

March brings us a new book. 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 feel like this book is promising a lot! Let’s give it a shot. First three to email me they want it get it at my expense! Have a great week!

Gratefully yours,

Adam Straseske, CMT

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