The S&P 500 was once again contained within it’s current trading range. After the week ended and the dust settled, the S&P 500 was up .19% from which all of the gains were due to Friday’s price action. The current trading range is ballpark the 2460 to 2485 level depending upon how you measure.
The longer price meanders in this range, the more likely a correction in price. We are 12 days into this sideways action and we have a possible wedge pattern evolving. Wedges are considered reversal patterns, so price would be correcting further sideways to downwards if this played out.
When it comes to be worried about a bear market…we are still not even close. Treasury bills have to start outperforming the S&P 500 on a 12-month basis and the S&P 500 is winning by about 13%. The MSCI All-World (ex-USA) Index has performed even better. It finished July performing better than the S&P 500 which signals we want to focus on international markets rather than the US at this time. The bears have a lot of work to do before we worry about the longer-term risk of being involved in the market.
The breadth of the market is oversold on the faster term oscillator and decreasing slightly on the slower oscillator. Last time breadth looked like this, we had a sharp, brief, sell off. This was back in May of 2017. The combination of these two oscillators is giving us a neutral stance to the coming week when breadth is viewed in a vacuum. It is a pretty light economic week as Producer Price Index and Consumer Price Index numbers are scheduled for Thursday and Friday morning.
The trigger did go off on Oil last week so we have started to dip our toes in the water. Almost all positions have a stop relatively far since second purchase areas have been identified lower. We are looking forward to this week to see if the international markets we like can continue their overall bullish behavior or if we start to see some weakness. Either way, it should be an interesting week!
Adam Straseske, CMT