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Ready Q4

End of quarter rebalancing may generate some volatility today. Otherwise, markets look like they are staged to continue their sideways oscillation.

There is little technically to suggest there is a breakout in either direction. Instead, it seems the all-time highs of the SPX remain resistance, and the 100-day moving average remains as support.

The big-picture story appears little changed. The Fed is supporting the markets by maintaining low interest. Trade war headwinds are preventing the stock markets from climbing much higher. So we remain stuck in this sideways pattern.

Until something material changes, it appears there is little the market should expect in terms of a major move in either direction.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by BigFoot), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from BigFoot. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the BigFoot’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Thin Air

The SPX is in a difficult spot. On the one hand, momentum in the smaller-cap stocks looks questionable; prices are above monthly trend; and earnings season has many concerned growth may be waning.

On the other hand, the prior intra-day high of just over 2940 is within striking distance.

So which way does the market go?

This is a tough call given that things seem pretty fairly valued at these levels. If you’re looking for a clear catalyst that drives equities higher, we may not know it until after the market has already placed its bets.

Markets aren’t in the business of sitting around and waiting for all the data to materialize. Often times they place their bets. Last week may have been an indicator as prices climbed while volumes dwindled.

Futures have indicated a fairly mixed open.

The trick looking forward is that the technical signals are mixed. At this point, the SPX is sitting atop a trend looking for a direction. Do we break out higher or retrace?

A healthy move for this market (SPX) would be to pull back to the 2860/2800 level the reverse to push on to new highs. What appears more likely is a move to take out the 2940 highs, followed by an even tougher decision about whether or not things should move higher from there.

The air is getting pretty thin at these levels. Markets seem to have moved higher not because of the news but because of a lack of reason for the trend to break. This makes things more fragile. A negative announcement could trigger the next 10% pull-back. But that doesn’t seem to be the prerogative of the markets lately. Given the now tired adage of TINA (there is no alternative), it appears the probability the SPX crosses the 3000 level this calendar year is still pretty likely.

SPX for the week

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by BigFoot), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from BigFoot. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the BigFoot’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

No Foolin’

You can say what you want about the news tape. You can parse the economic data. You can look at the yield curve. And in spite of it all, the technical pattern is looking more and more like a re-test of the 2019 highs will be tested by the SPX.

SPX futures are indicating a spike higher at the open. This after the index has been consolidating around the 2800 level since late February.

Last week’s close above 2800, along with this morning’s futures pop, are a good indicator the that March 21 highs of the year will be tested (and likely surpassed) today.

If this occurs, it’s probable 2800 shifts from being the previous resistance level to the new support level. This gives the SPX the opportunity to push higher, re-testing last year’s highs, and possibly going even higher.

It would take a genuine shift in both economic data and policy to change the trend if this breakout occurs. For the time being, this can almost be called a stability bonus. Even though most media outlets like to stir the pot, the news narrative has not materially changed. And, more importantly, the FOMC rhetoric hasn’t changed.

This stability lends a degree of comfort for the markets. It’s possible we can see slight multiple expansion from these levels simply because, while negative, the current information cycle still indicates less ‘unknown,’ and therefore more risk can be priced higher.

Well, that, plus fixed income just has no meat left on the bone. So anyone looking for yield is forced into the deep end of the credit pool, or back into the stock markets. So the TINA market (there is no alternative) remains part of the story.

However you slice and dice it, the markets look to have a good shot at pushing higher over the next few weeks.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different types of investments involve varying degrees of risk, and there can be no assurance that the future performance of any specific investment, investment strategy, or product (including the investments and/or investment strategies recommended or undertaken by BigFoot), or any non-investment related content, made reference to directly or indirectly in this blog will be profitable, equal any corresponding indicated historical performance level(s), be suitable for your portfolio or individual situation, or prove successful. Due to various factors, including changing market conditions and/or applicable laws, the content may no longer be reflective of current opinions or positions. Moreover, you should not assume that any discussion or information contained in this blog serves as the receipt of, or as a substitute for, personalized investment advice from BigFoot. To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified public accounting firm and no portion of the blog content should be construed as legal or accounting advice. A copy of the BigFoot’s current written disclosure statement discussing our advisory services and fees is available for review upon request.

Market Macro Fails

For the first time since 2016 the BigFoot Market Macro Signal has gone negative. And we’re already set up for a potential whipsaw, as futures are pointing to a higher open that would put the SPX above the threshhold to flip the Macro back into buy territory.

Over the weekend the big announcement was a temporary truce between the US and China. The details are a little fuzzy, but basically, no new tariffs, and some rollbacks on a few – at least for the next 90 days.

This doesn’t mean the trade war is over. But it is positive progress. So we should be good to go, right?

Woah, woah… slow your roll. Just because we have a deferral of action doesn’t mean everything is okay. And technically, things are still unclear. In fact, if the futures pop higher today as expected, there’s good chance a pricing gap will materialize.

We’ve spoken many times on conference calls about how the markets abhor pricing gaps. And in this case, unless the market managed to push above 2825 or so, it’s likely we’ll dip back down to 2760 some time this week first to fill that price gap.

From a Macro perspective, we just want to see the markets finish the year above 2754. This should be enough to flip the signal back to a buy. Which is interesting, because last Friday’s close would have done it. But, alas, that’s not how the signal works.

We’re in a bit of technical no man’s land. There markets have had a double-dip this year, but the fundamental news is pretty optimistic. Jay Powell and the Fed gave the market the gift it was looking for (a more dovish stance), and Trump has softened on the trade war. Pricing multiples have fallen to essentially their low-point for the year. So there’s room for the markets to go up, but the mixed pricing signals also mean there’s room for the markets to dip a bit yet.

Given we’re already into December, and most of the earnings for the year area already over, it’s difficult to see a rationale for why the markets should push to all-time highs before the end of the year. In fact, given the mixed Macro signal from the software – and the anemic 40% long positions ratio – it’s difficult to see much more than a sideways market from here – even with the ‘big news’ about the deferral of the trade war with China.

Make no mistake, Monday is shaping up to a be a positive day for the markets, with the SPX likely to push above 2800 intra-day. But Monday may not be enough to shake off the bear-market chatter just yet… Tis the season for miracles, sure. And perhaps Santa is bringing more than coal for the year. But it doesn’t look like yuge breakout to finish the year at this point.

Interestingly enough, the ‘bear market’ may have already silently happened in the form of asset rotation. Many of the high-flying tech names have already had over 20% corrections in pricing. We just haven’t seen the entire market dip simultaneously. A move like that may be reserved for our next recessionary environment. When that actually occurs is still a subject of much debate.

For the week – enjoy the reprieve. Just don’t let a few days in the market head-fake you into thinking everything is all clear. Plenty of up days happen in bear markets. Better to keep your cool and play this one by the numbers IMO.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

If You Ignore the News…

If you ignore the news, the technical picture for this market looks strong.  The past several weeks have seen volatility reign in, so the over-bought conditions are a lot less menacing than they were a few weeks back.  As of right now, traders seem content with 2900 has the support for the SPX.

With Canada making some last-minute concessions to save (most of) NAFTA, the markets also seem to be pleased.  Futures are higher.  Don’t look now, but the sideways pattern of the SPX may have just been broken.  If so, 2950 should be on the radar in the next week or so.

For the week, the first level of resistance is 2940 — next level is 2960.  Support continues to hang around the 2900 level.

We’re also at the start of Q4.  Many analysts have been raising expectations since Q1.  This may end up being a tailwind that makes for a pretty decent late-year push.  A 5-to-7% move higher from these levels is not out of the question for the quarter.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Get Back to Work

Vacation season is officially in the rear-view mirror.  Almost every school in the country is done with summer and back to the grind.  And the next break in the action won’t really occur until the Thanksgiving Holiday.  Look for volume to start climbing.

Let’s skip the fluff and get right to the chase:  the technicals are still showing bull signals at this time.  The media cycle is all aflutter about trade deals and the woes of the presidency.  Meanwhile, earnings are up, and interest rates are still tame.  This seems to be the only thing market participants care about right now.  Speculating on what out-there news story will take down Trump just hasn’t been profitable.

So what do the technicals tell us?  So far, the 2900 level is the next battle.  While markets closed at new highs, there may be some consolidation between 2870 and 2910 or so while participants settle into this new range.  Otherwise, the markets could shoot up toward the 2940 levels this week.

Over the weekend futures got as high as 2912.50 before pulling back to start this week.  The early indication is that the pull-back is likely to lead to an opening level similar to last Friday’s close.  It looks like the underlying momentum could turn positive though, pushing things higher.  If this market gets a little push, it could climb very quickly.

For the week, look for a positive bias.  It appears one of two likely options are in the set-up:  1) the market does some back-and-forth between 2870 and 2910,  or 2) the market finds its footing early and climbs passed 2925 while hunting for 2940 or so.  If option 2 happens, 2910 should become a new line of support for the week.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Breakout (Almost) Confirmed

Last week the SPX closed out the week at the highs for the year.  Good sign.  It’s tempting to call this a break-out situation.  And, in the simplest sense of the term, that’s true.  But we want to see some follow-through this week to see if upward momentum will continue and strengthen.  That’s the real test.

While the future is never be certain, this kind of break-out likely means the markets have higher to climb.

In the face of relatively manageable guidance from the FOMC, economic numbers remain solid, and the Fed is apparently going to remain measured and transparent enough to meet the market’s fickle expectations.  So the primary unknown now is trade.

China is the elephant in the room on this one.  It seems Europe, Mexico, and the like are all improving situations.  But China — that’s the interesting one.

As discussed on our forum calls, our belief is that the China trade concerns will resolve themselves in the near future.  But, of course, those are educated guesses.  We’ll see where things ultimately end up.

In the mean time, the all-time high close puts the 2900 mark on the radar for this week, with 3000 as the next line in the sand to pay attention to.  While unlikley, it’s possible the markets could test the 2900 level this week.

The other thing to note is where the markets close this week.  A close below the 2873 level isn’t necessarily a big problem.  But a weekly close below this level would mean the breakout is not yet confirmed.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

S&P500 Eyes All-Time Highs

While it is difficult to forecast a breakout in stocks in advance, the S&P500 is less than one percent from closing above its all-time highs.  That can easily be taken out in a single day.  The question is which day?

Given the way data will be released this week — with the majority of market movers coming on Wednesday (with the release of FOMC minutes) or later, look for a trading range up until that point.  From Wednesday on, volatility may climb, but the probability of a close above the 2018 highs is climbing (despite mixed bag of global economic data).

The key thing to watch will be a weekly close above the January highs for the S&P500 — moreso than the DJIA or the NASDAQ (as they are either too concentrated in numbers or industries respectively).  A weekly close at all-time highs would be a strong signal the SPX is headed to the 3000 mark in the coming weeks.

There are a few simple things to keep in mind why this is happening:

  • Despite election discussions already starting, they’re a  ways off yet
  • The FED continues to operate with a lot of transparency
  • Corporate profits remain strong and growing overall
  • Interest rates remain low
  • Inflation remains relatively contained
  • Despite historically low unemployment rates, wage inflation has not gone bananas
  • Real estate has cooled slightly (which is probably okay as things were getting bubble-ish in many markets)
  • AND perhaps most important, TINA (There Istill No Alternative) that looks like a better place to get a return on your investment besides the stock market.

Any of these things starts to change and we can talk.  Until then, it looks like the market will keep doing what it’s doing.

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

 

Taking out the 2018 Highs May Be Tough This Week

The wind has been in the sails for a few weeks now, and the S&P500 is close to reclaiming the highs for the year.  The trade wars have shown little effect on the domestic market’s rise… until Turkey made the headlines.

The instability seems to have thrown a wet blanket on the market’s climb.  What is unclear is whether or not this is a sign of something more significant to come.  Turkey, as an economy, is relatively small.  And, while larger than Greece, it has its own currency instead of the Euro.  This makes the situation different than the Greece crisis which threatened to European Union more.

Given the market’s current behavior, issues with Turkey look more like a speed bump than a change in course.  Still, the concern of a strengthening dollar slowing down economic growth could make the Fed’s rate decisions more challenging.

Over the weekend the S&P futures declined to the 2820 level before recovering to what looks like flat levels for the open.  The concern will be if the larger market re-tests these overnight levels.  Any negative news that spooks things could be a pretty good indicator things will re-test near these lows looking for support.

Given the new uncertainty in Turkey, paired with the Fed’s current course of rate hikes, it looks like this week could be more of a sideways trader.  The low for the range is probably around 2820 for the SPX — with an extreme of 2800. A breach of this level would be viewed as problematic by most traders.

On the up-side, the story is still about trying to take out the highs for the year.  If the SPX manages to breach the highs for the year intra-day, that’s a good sign.  But the real trick is getting a close above the high for the year.  And if we close the week out above the highs for the year (probably unlikely this week), that gives a green light for the next leg higher.

Overall, the bullish technical trend remains in place.  Just don’t be surprised if this week trades a little flat-to-negative as the markets sort out what’s happening with Turkey and determine whether or not contagion is likely (which it probably isn’t).

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.

Does this Week Even Count?

Because the 4th of July holiday falls on a Wednesday this week — and the 4th-of-July-Eve holiday apparently justifies a half-day for the markets on Tuesday — you can expect a couple things this week:

  • Volume will likely be lower than average
  • Volatility may be higher than average (on lower volume)

There’s actually a fair amount of economic data due to be released this week – including FOMC minutes.  So there markets will have some things to digest.  But many of the players will likely be out of the office until next week.  So, while it’s bold to say, it’s possible this week is kind of a throw-away.  It’s similar to the Christmas/New Year’s holidays in that many of the players have more-or-less positioned their books so they can be out of the office.

So don’t expect a breakout week.  Futures are indicating a lower open on Monday, with the 100-day-moving-average looking like the support level — right about 2700 for the S&P500.  If you’re looking for resistance, you’ll find the first major areas at 2750 and 2790.

Have a safe 4th of July — and remember:  no forum call this week!

IMPORTANT DISCLOSURE INFORMATION

Please remember that past performance may not be indicative of future results. Different
types of investments involve varying degrees of risk, and there can be no assurance
that the future performance of any specific investment, investment strategy, or product
(including the investments and/or investment strategies recommended or undertaken by
BigFoot), or any non-investment related content, made reference to directly or indirectly
in this blog will be profitable, equal any corresponding indicated historical performance
level(s), be suitable for your portfolio or individual situation, or prove successful. Due
to various factors, including changing market conditions and/or applicable laws, the
content may no longer be reflective of current opinions or positions. Moreover, you
should not assume that any discussion or information contained in this blog serves as the
receipt of, or as a substitute for, personalized investment advice from BigFoot. To the
extent that a reader has any questions regarding the applicability of any specific issue
discussed above to his/her individual situation, he/she is encouraged to consult with the
professional advisor of his/her choosing. BigFoot is neither a law firm nor a certified
public accounting firm and no portion of the blog content should be construed as legal
or accounting advice. A copy of the BigFoot’s current written disclosure statement
discussing our advisory services and fees is available for review upon request.