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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.

Does Downside Risk Outweigh Upside Potential?

After the S&P 500 managed a weekly close above 3000 the wind seems to be coming out of the sails. Last week finished down, with the lows of the week coming Friday at the close. With more and more companies issuing cautious forward guidance, it seems there may be more downside risk than up-side opportunity for near-term investors.

Last week’s pricing move, while not unexpected, makes sense technically. Markets hit an all-time high, so traders, in the face of cautious corporate outlooks, start taking money off the table and locking in some mid-year profits.

3000 was noted as a significant line in the sand. Going into earnings season, investors have questioned whether or not forward guidance would be optimistic.

The issues seem fairly straight-forward at this point – low fixed income rates force people into the stock market, but declining economic conditions and cautious guidance make valuations look more questionable. Fed action continues to wag the dog at this point, and trade policy just adds to the uncertainty. The cocktail really hasn’t changed much for the past several months.

This issue is, at some point, the idea of a market correction can become a self-fulfilling prophecy. The question is, at what point will bears outnumber bulls? Or perhaps a better question: at what point will sellers outnumber buyers? Because that can move prices.

Unless we get some kind of specific black-swan event, it is unlikely there will be a specific point that markets pivot on. Instead, there will be a point at which a negative movement captures momentum and just keeps running beyond what people expect.

Looking at the technical pricing levels, this week may be another negative. After testing 3000, a pull-back would not be un-typical. The question is where might support be found? For the week, 2950 looks pretty strong. But this trend could easily pull-back to 2900 without being considered anything more than a run-of-the-mill pull-back.

That kind of move would put the S&P 500 at its 50-day moving average. A move lower than that would be a more significant shift and could be a sign of further deterioration to come. How aggressive the pull-back occurs could also be important. A few days of sell-off is pretty typical. But a more extended down-draft — especially if based on a specific event — would be concerning.

Perhaps the most important player in all of this will be the Fed. Markets have become near-dependent on the FOMC providing low rates to force a bid under this market. If, for some reason, other factors outweigh these low rates, the stock markets look less attractive to investors. At that point, we will have more to discuss in this blog. Until such time, the story stays the same: TINA until we hear otherwise.

S&P 500 projected range for the week of July 22, 2019

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 ndirectly
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.

Here Comes Earnings Season

The stage is set for an exciting earnings season. Guidance is one thing, but this is where the rubber to meet the road. Can earnings actually grow from here? Or have we seen peak earnings growth for this economic cycle?

It may not matter… yet. The Fed has all but assured markets a rate cut is coming. So there’s little incentive to run for the fixed income markets. There really aren’t a lot of options for investors to find yield — or any returns for that matter — outside of select real estate markets or equities markets. So a multiple-expansion rally is not out of the question at this point.

The funny thing is, while the fundamental story driving this market higher has not changed, the technical picture has become a mixed bag for the S&P 500. The rather orderly expansion continues to behave calmly as the day-over-day pricing break new highs. In fact, five of the last six trading weeks have finished positive.

But there’s more to the story than just printing higher highs. The SPX is above it’s 50, 100, and 200-day moving averages. And it’s now more than 1.5 standard deviations above its 21-day trading average. By those figures, this market is over-bought.

So which is it? Orderly or over-bought? Perhaps both. The thing is, despite being over-bought, there does not seem to be significant pressure for a price correction. Now that 3000 has been breached, the index will need to test this level to see if it will maintain support. Otherwise, a pull-back toward the 2940/50 level would be fairly typical based on the pricing pattern unfolding.

The upside, while possibly breaking out, appears to be around the 3035 level for the week. If this level is breached, a run for 3050 is certainly possible. But given the over-bought nature of the market, it would take some pretty good earnings news to push things that quickly while we’re already at all-time highs.

Should a downdraft materialize, look for the 3000 level to be the first test. A breach of this level is not exactly a problem. It could just mean a test of the 50-day moving average, or somewhere down near 2900 is even possible. This does not negate the current up-trend. It would be a fairly orderly and typical round of profit taking to see this kind of price move. Should the 100-day moving average be pierced then it may be worth taking a closer look at pricing.

For the week, look for the bias to be positive, with some volatility increasing as earnings season gets under way. As long as expectations are met and guidance is reasonable, the 3100 level is still within sight in the next few weeks. If sentiment turns, we will re-evaluate at that time.

Meanwhile, the BigFoot database continues to be around 78% long. This should remain stable as long as volatility remains low.

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.

Just Right… for Indexes

Don’t look now but markets are near all-time highs (at least for the major indexes).

Last week’s close was the highest (weekly) in history for the S&P500. Discount the fact it was a holiday-shortened week, but this is still a strong signal.

Perhaps most noteworthy was the jobs report. With a big up-side surprise, this makes for an interesting conundrum: is the economic strength such that the Fed will change course, or are rate cuts still in the near future? This week should provide meaningful insight into this question.

In the mean time, it looks like things are in a sweet spot right now: bad news signals Fed intervention, and good news signals… good news. It’s the rare cocktail of almost everything aligning (in the short term) for a push higher.

Futures are indicating a lower open for the SPX, but this may simply be because traders are returning from a holiday-extended weekend and need to square up their portfolios. Once that dust settles, things appear ripe for a short-term push higher.

It appears the SPX has 3000 in its cross-hairs. If the current technical trend comes to pass, once breached, there may be a quick move towards 3100 before the index pulls back to re-test this level.

Keep an eye on the overall picture though. While the indexes look great, not every area of the market is enjoying prosperity. The interesting thing about this push higher is where the money is flowing. While the indexes move higher, a lot of small and mid-cap stocks appear to be left behind in this rally. (Sure, they’re moving higher – but they’re lower than their March highs, unlike the larger-cap indexes which are breaking out to all-time highs).

What this means is unclear at this time. Do we have another significant leg higher for all equities (especially when looking at the yields in the fixed income markets today)? Or are we looking at the last flash of brilliance as investors pile into large-caps before the bears have their day? Time will tell. But for now, the technical picture looks short-term bullish.

For a deeper dive into the technical picture, join us on this week’s forum call. Until then, keep an eye on the 3000 level for the SPX. If this gets breached Monday, things could go as high as… 3082ish this week (yes, you read that right). For now, this number seems ambitious. But, as goofy as it may seem, 3025 looks probable at this point.

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.

Waiting on Friday

Either the government stays open or it doesn’t. Markets will be keeping an eye on this. Not that the markets care about the closure all that much, but it’s a sign of whether or not Washington is going to be a headwind or tailwind.

Odds are we’ll see another shutdown. Markets may simply move in a sideways pattern until this gets resolved. As of this morning, futures are pointing to a slightly higher opening.

The VIX has dropped a bunch too, indicating the markets are not too worried about the well-forecasted shutdown. It appears the biggest issues on the markets remain a) the Fed, and b) really it’s still the Fed. The news outlets would have you believe it’s Chinese trade or jobs or something. But the Fed is the biggie. The rest of that is just data for how the Fed may respond.

Look for a sideways week going into a highly probable (read as about 95%) government shut-down 2.0. Once the rhetoric starts, we’ll see what happens from there.

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.

New Year’s Shift

Happy New Year!

This is the first full week of trading for the year – so back to work!

Markets are trying to shake off the December 2018 hangover. Last week’s first trading week sure made it interesting. The big news was the blowout jobs report last Friday coupled with the more Dovish tones from the Fed. This cocktail was the recipe for a huge rally on Friday.

Has this changed anything? Only the short-term outlook. It seems everyone had written off the economy for dead in December. With the Fed tightening, it was only a matter of time before the recession word came into play. But then the jobs numbers came out.

Realistically, the problems are unchanged from last year. The difference is outlook on the Fed. If the money supply isn’t going to be choked off even more aggressively (because, remember, they’re still reducing their balance sheet and no longer buying bonds), perhaps the economy can continue to grow.

Plus the American public is about to get a very real look at whether or not they will experience personal tax savings under this new plan. It’s been a popular target because of growing deficits at the Federal level, but folks are about to get a direct taste of ‘what’s in it for me.’

Some good news on China talks, the Federal government starts operating again (this is less of a concern to the market than the media would have you believe), and some decent earnings numbers and guidance in Q1 and this market could be back on track in short order.

The Fed shifts to more hawkish, trade talks with China drag on with no change, or we start to see numbers indicating an actual economic slowdown, and this market could head south all over again.

So for now, we wait a couple weeks and see how the data shapes up.

If you want to be a stickler, the SPX actually hit a 20% drop from peak-to-trough during December. So one could argue we’ve had the shortest bear market we’ve ever seen. Strangely, no one seems to be saying that. The talking heads keep talking about when the bull will die… so apparently an intra-day swing, or a one-day blip, isn’t how they want to measure things.

For the week, it look for 2408 support, and really no upside resistance to speak of, so 2575/2600. If this seems like a comically large range for a technical call… it is. But that’s what happens when you’ve had the kind of volatility that wrapped up last year. Things get blown-out, over-sold, and the algo’s get a little wild. Until volatility subsides (if), this may be typical for a while.

Cheers and fingers crossed for a great 2019!

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.

2018 Lows in Sight

Looks like the stock markets made Santa’s naughty list. Last week seemed like things were stabilizing until the Friday afternoon selloff threw that idea out the window. At this point, sentiment is shot. It’s the end of the year. And the Fed has backed itself into a corner – damned if it does, damned if it doesn’t. Because, despite decent earnings and decent economic data, the perception is the economy is rolling over.

So it looks like the lows of 2018 may be revisited soon. Friday’s price action already pulled the major indexes back into correction territory. There’s just very little traction to be had. And unless Jay Powell pulls a rabbit out of his hat, there seems to be little for the market to get excited about this year.

Short of a formally inked trade deal with China, it appears the high for the year was put in back in October. And it appears the low for the year may yet to be seen.

For the week, look for continued volatility as the market searches for a low around 2532 intra-day. If the SPX breach of this level and you have to start looking into 2017-year for support levels… we’ll cross that bridge if (or perhaps when) we get to it. Judging from the futures markets, Monday will open lower. If the Fed-speak is wrong though, a 60-ish point decline for the week is more than possible.

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.

Technical Outlook Still Unclear

While the long-term trend support seems to be in place (around the 200-day moving average), the intermediate-term numbers are all over the place.

This week is an interesting set-up.  The futures over the weekend are indicating a strong positive open for the week.  And over 1000 companies report earnings this week.  This, paired with very little Fed activity, should make for a decent backdrop for the markets.

Looking at the technical data, it’s a tale of two markets.  One market has the SPX running back to over 2825 this week.  The other has the SPX failing down to about 2675.  The volatility range looks like it could be quite high this week.  The bias, fortunately, appears to be positive.

The last several weeks have taken a lot of the wind out of the sales of this market.  While it doesn’t appear a full-blown bear is yet upon us, the BigFoot database has now fallen from the mid-70’s in terms of percent long, to low 50’s.  This is a meaningful shift.

On the one hand, money has been in motion, so some new opportunities should arise.  On the other hand, money has been in motion, and there’s clearly a shakeup.  Tech, in particular, has taken a hard hit in October.

Given that all three macro indicators remain positive, the backdrop for a major decline still hasn’t materialized yet.  Once the elections are over perhaps the markets can get a better idea which direction they’d like to commit.  For now, look for continued volatility, with a positive bias 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.