Is it Finally Bad Enough?

Q1-2018 is officially in the books — and what a frustration.  January came in like a bull, but February and March went out like bears.  In the end, there was a lot more volatility, but investors haven’t moved the needle much in terms of account values.

The theme has been a mixed bag of good and bad…  the economic data looks so good that the Fed has to tighten monetary policy.  Taxes are going down, but tariffs are going up.  It’s like each piece of good data has a corresponding bad piece.  You know what they call that?  A market!

While the talking heads sort out the news stories of the day, the underlying technical data has its own story to tell.  Last week the 200-day moving average appears to have held support — in the final week of the quarter — in a shortened trading week.  The S&P500 also touched it’s 10% pull-back mark again.

Early indications are that the consolidation trend may be finding a base at these levels.  If so, we could be looking at another leg higher in equities.  Consider that markets appear technically oversold, and that corporate earnings continue to climb, and the underlying data doesn’t appear things are going to collapse.  Corporate balance sheets — and mega-bank balance sheets, for that matter — look nothing like they did in 2008.

This may sound optimistic.  And, admittedly, it’s too early to call this one.  But it seems wise to bias toward the strong underlying economic data over the shorter-term headlines risks of this market.  Plus, a look at the Sigma/BigFoot database shows we’re at a very low-point in terms of the percent-long for overall positions, but the macro-indicators are all positive.  This is yet another sign we may be reaching a point where the volatility and turnover in the equity market is going to start swinging the other direction.

This Thursday’s conference call should be a fun one!

So far this year…

For the week…

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