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Begin Operation Wrap-Up

With the remaining trading days of the year dwindling into single digits this week, expect this week to be a push for the end of the year. It’s basically the last full week of trading we’ll have. After this, volumes typically start to drop… not to say the markets won’t move higher or lower on low volume (they absolutely DO in many cases), but it is to suggest much of the news for the year — including gains distributions — will be dialed. Markets will be shifting their gaze to 2021.

As markets look ahead, you can basically roll back about a week, read the prior BigFoot Blog, and get a sense of what’s going on. Little has changed. Last week some momentum bled off, but the larger up-trend remained intact.

For this week, the question is whether we’re looking at a sideways range or a break-out toward new highs. The futures movement indicates a move to the higher side of things, with the S&P 500 still eyeballing the 3800 level. The technicals are a little more benign, caught between a sideways trend and an up-trend.

Given last week’s meh performance, the SPX may be shooting for closer to 3757 for the week (a move higher, but at the lower end of the current trend). Rarely has this market followed trend this precisely. And there are still two shortened trading weeks to follow where any little bit of good news surrounding stimulus out of DC could cause the markets to pop.

Keep in mind, it’s the short weeks that exaggerate market behaviors sometimes. The theme of 2020 seems to be a big more negative (no shock there), so there’s about a 50/50 shot (total technical swag guess on the percentages here) that the markets publish their highs for the year this week, and we move sideways from there.

Interestingly enough, the data last week barely moved. The BigFoot Database percent-long, along with much of the other technical indicators, was nearly unchanged. About the only thing worth noting is we’re less over-bought.

Given the lack of change, taking a step back and looking at the larger theme implies the market is still seeking a higher move. Since the negative of last week was not a powerful decline, we may see more of a pop higher this week… If futures are an indication, Monday should open strong. We’ll see if Washington provides any additional excitement to push things higher.

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.

To Re-Open or Not

Here’s something I don’t get to write very often: even though the markets look over-bought here, they looked poised to take out their all-time-highs this week.

Sure enough, major indexes are over-bought – statistically, I mean. But statistics schmatistics. This is 2020, where anything goes.

A quick look at the chart below will show that prices are way at the top of the ‘cloud’ (a technical measure of the last 21 trading days and the standard deviation of the period’s trading range). In typical circumstances this would suggest prices are temporarily too high and due for a pull-back. But did we mention 2020?

At times a shift in news or sentiment will create a shift in the market. It is a dislocation, but it also marks a potential trend-shift in market prices. When this occurs, it’s not uncommon to see ‘typical’ market measurements temporarily thrown out the window. And that’s what appears to be the set-up.

Last week’s announcement of a Covid vaccine was greeted by a lot of optimism in the markets. Meanwhile, on the other hand, the number of reported Covid cases is at an all-time high. The beauty of the markets is, it’s willing to strip away much of the politics from the data. And the rise in cases doesn’t seem to matter that much to the success of the economy (as long as cases don’t outstrip hospital capacity).

What does seem to matter is whether or not economies are allowed to remain open. If Covid cases lead to enough hospitalizations, new lock-downs could occur (such as the new lockdowns announced in Oregon beginning Wednesday, shutting down dine-in restaurants and restricting stores to partial capacity).

New shutdowns would likely be greeted by market pull-backs. But so far, the shutdowns appear to be mainly a West Coast deep-blue phenomenon. We shall see if the concept gains traction or not. The announcement of yet another vaccine today (this time from Moderna) shows promise and suggests a silver lining may yet be found for this pandemic.

For the week, look for the markets to open higher on Monday and likely set all-time highs for both the S&P 500 and the DJIA. The SPX is now ‘hunting’ for the 3800 level, perhaps before year’s end. For this week, the target appears to be 3675. It will take a drop below last week’s low of 3511 to break this trend.

A couple of other details worth noting:

The SPX, being more tech-heavy these days, may underperform the DJIA for the remainder of the year. Likewise, the NASDAQ may underperform the other indexes over the same time period. There has been significant price improvement in the Russell 2000 indicating money is beginning to shift in the economy. The ‘stay at home’ trade has been a very powerful trend for 2020. However, Big Tech in many respects is over-bought. It would not at all be surprising to see money begin to shift out of big tech toward other areas of the economy if vaccines shift the trade from stay-at-home to back to the ‘old normal.’ If this shift happens, it would create a headwind for both the S&P 500 and the NASDAQ given their overweighting to tech.

As always, do your own homework. This is just a blog, not a recommendation. But if you’ve been reading this for a while, you know how that works.

Now please forward to a friend or share this somewhere. Apparently it helps search engines find us. So we’d sure appreciate if you could help us spread the word. Cheers!

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.

Tech Corrections

Let’s call this market pull back what it is: a pull-back in mega-cap tech.

Since Big Cap Tech has become the largest players in most of indexes, a pull back in this segment of the market has the affect of dragging down about everything. So, last week, down it went.

A quick look at the ETF ticker FDN and you’ll see that tech is officially in a correction (so more than 10% decline).

This is not to say other segments of the market are immune. Many sectors of the market dropped last week. But tech seems to be the tail wagging the markets.

Technically speaking (no, this is not a euphemism, we’re talking about using technical/quantitative analysis here), the markets may have found a foothold here. If so, look for volatility to remain, but we may see pricing begin to drive back toward SPX 2425 this week.

If you want to get into the details behind this number, it’s simply the nearest round number to a mid-point of about a calendar month of trade data. Last week markets traded up over 1.5 standard deviations from the 21-period trading average (trading days, so about a calendar month). When the selling started, the markets declined to about 1.5 standard deviations below the same period. So, for this week, look for things to oscillate back towards the middle… from over-bought to over-sold back to the middle of the range.

The S&P 500 50-day moving average is at 3331, That’s a likely area for support this week (even if the markets dip below it intra-day). If this support area fails there could be an extended slide lower. We will address this in next week’s blog.

For this week, look for volatility to remain, but for the bias to be slightly positive as large-cap tech looks to likely regain some of its lost ground.

SPX may move towards the 3425 range after shedding some volatility 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.

Santa Said Risk On (But for How Long?)

It’s been a fantastic rally for stocks over the past couple months as Santa Claus was coming to town. Now is where things get interesting.

As discussed, last week was really the last full ‘trading’ week of the year. With the Christmas and New Year’s Holidays happening mid-week you can count on lower trading volume for the rest of the year. And more than likely, the participation will be light (don’t want to mess up those bonuses for portfolio managers).

To top it off, news on the ‘trade war’ is positive this morning as China says they’ll reduce or eliminate tariffs on a number of goods in the new year in anticipation of an inked trade deal in the near future.

This news has been greeted with optimism in the futures markets as the major indexes appear poised to push to even higher all-time highs. What a (calendar) year for the stock markets! (I’m sure we’ll get a pile of statistics to chew on in the coming days and weeks – best market since 2013, etc etc).

But before you pop the cork and celebrate, a word of foreshadowing: on the technical front, this market is way over-bought (at least by metrics we typically track). And on top of that, the multiple on earnings has crept up pretty high.

Fortunately, word on the street is still pretty skeptical. But we’re seeing Wall Street pundits raising estimates and there is a lot of chatter from the retail investor about how great things are (even if they’re still nervous about the economy going into an election year).

It’s precisely these times one should be careful about getting sucked into emotional euphoria land.

Warren Buffet famously said you should be fearful when people are greedy, and greedy when people are fearful.

Well, this is a tricky spot. The major indexes have had huge moves in 2019. The temptation to chase performance and pile into big winners is like a Siren’s call for many. And the technical set-up is concerning as we’ve seen this market not only gap higher late last week, but it’s poised to do so again at today’s open.

We’re at two standard deviations above the 21-day trading average for the SPX. Based on the futures markets, we’ll go even higher that that this morning.

It’s no guarantee that the markets pull-back from here just because we’re over-bought… or in a shortened trading week… or because we’ve had likely two price-gaps higher in the last two trading days… or because we’ve had huge calendar-year profits for the year… or because traders want to start positioning for Q1-2020… or a host of other reasons…

But you get the idea… markets have a lot of reasons they could pull-back from here. If they don’t, it may be time to start revisiting Warren Buffet’s old saying again. Because if there’s no fear in this market, maybe there should be.

Then again, for you BigFoot users, this is exactly why we have a process instead of just using our gut. Sure, there are no guarantees in the world. But having a systematic approach to analysis and following a set of rules and rationales leads to more consistent behavior. That means fewer variables, and higher statistical predictability. Or, said another way, it helps reduce the potential for human errors by quarantining some of the emotions that often lead to poor decisions. So tell a friend – or if you’ve stumbled upon this blog for some other reason, give us a ping. We’d love to walk you through the system and show you how to put the power or both artificial intelligence and neural networking to work in your investment process.

Looking pretty over-bought here
There may be further to go, but the air is getting pretty thin up here

As a head’s up, next week’s blog will be pretty minimal. As is the norm for this time of year, I will spend some time pulling together data and doing annual projections for 2020. I will probably do a brief year-in-review snapshot as well. It’s pretty easy though – markets exceeded my expectations because earnings exceeded expectations. It wasn’t a major miss (I had a high for the year at 23% return – we’re currently around 27% on the SPX), but I was surprised to the up-side. Now that I think about it though, should I even say this? Don’t want to jinx things in the last few trading days of the year…

Thanks for continuing the read these musings. I hope you have a wonderful holiday seasons, a Merry Christmas from my household, and a Happy New Year as we step into 2020. May you as blessed as I have been…

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 Headwinds for SPX this Week

After a 7-day win streak the SPX may be bumping into some short-term resistance. We’re now spitting distance from SPX 2900, but the index is out ahead of most of its metrics at this point.

In fact, the SPX is more than 1.5 standard deviations above its 21-trading-day average. It’s above the 50, 100, and 200-day moving averages- and it’s above it’s 21-day linear regression.

In most of the traditional ways you’d analyze this market, it’s over-bought at this point. That makes for the high potential of short-term profit taking from traders and professional money managers.

The next thing to watch for on the horizon is Q2-earnings season. We’re running right into the throws of that now, with Alcoa reporting on April 17th. Those numbers should have a significant sway over the momentum of the SPX.

For the week, we may give a little back, with 2870’s to as low as 2830 being on the radar depending on the news cycle (the latter number being fairly extreme for a one-week move).

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.

Trade Wars are Easy to Win (We Hope)

Last week Trump threatened to triple down on China with even more tariffs if they didn’t come to the table for a trade discussion.

Meanwhile, the politics of the day have the country so split along partisan lines, there may be very little political advantage to Trump to deviate from this position.  So the game of economic chicken continues, and we may get to test the theory about how whether or not trade wars are easy to win.

Naturally, this has the market spooked a little bit.  But so far this isn’t enough to trigger a pull-back.  It’s just enough to arrest the climb higher.  So basically, it looks like a set-up to repeat similar price movements from last week.  The SPX 2872 level is still the key support area.  A failure here drops support down to the 2850 level.  As far as resistance goes, the first area will be around 2900 (or a few points higher).

So basically, September is shaping up as a consolidation month so far.  No one seems ready to call this thing over because the underlying economic data — and relative pricing of stocks (not to themselves, but compared with assets like bonds) still seem okay.  But the prospects (or at least media rhetoric) about trade wars and economic boogie men keeps things from moving substantially higher too.

For the week, the SPX appears neither over-bought nor over-sold.  So we’ll need to keep an eye on things to see if how the market resolves.  The big-picture trend remains positive, but there are no guarantees of anything heading into an election cycle.

<sorry, charts are down this morning.  Will try to get this updated soon>

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.

 

 

Tech Shift

The big news last week was the 20% drops for both Facebook and Twitter.  The entire tech sector seemed to catch a cold last week.  But here’s a little perspective:

Both Facebook and Twitter had been on phenomenal runs for the year (with Twitter nearly doubling).  Both companies are reinventing their privacy rules.  And both companies are taking on the ‘fake news’ problem.

In short, both companies are modifying their business models — and the impact is significant enough to warrant a re-evaluation by analysts.  This appears to be what the markets have done – re-evaluated pricing, and adjusted down for the short-term as these giants figure out how to deal with these new challenges.

Does this contagion spill over to the entire market?   A little… particularly because Facebook has grown to a point that it has a material impact on indexes.  But does it indicate a systemic problem?  Probably not (but we’ll see).

From a technical perspective, the major indexes were still pretty high.  The SPX was reaching over-bought territory again heading into its fourth week in a row of gains.

So now what?

It looks like the SPX has backed off from its over-bought status.  Now some key levels will be tested, as overnight futures dipped over the weekend before recovering into Monday’s open.

Look for the trading range of 2800 on the low, and 2850 on the high, to be tested this week.

There are a lot of big names to report earnings this week.  If the profit numbers are solid, we probably see this market grind higher.  It’s still fighting some political headline risk.  But the overall backdrop is still stock-favorable.

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.

Within Striking Distance

Now that the SPX has closed above 2800 it’s within striking distance of re-taking the 2018 highs up near 2870.  Crazy enough, this could happen quite quickly.  Economic data is light this week so eyes are on earnings.  Absent a black swan event, the stage is set for this market to go higher.

That’s really the summary.  The rest of the news about trade wars and international relations is so badly misrepresented by partisan media outlets that markets have about tuned them out completely.  Unless policy actually changes — or missiles start getting lobbed at countries — it seems this market is about over the finger pointing.  It’s getting back to a more normalized ‘results’ driven analysis, with the Fed’s monetary policy now taking a partner roll to economic data rather than being the primary driver.

The SPX is a bit over-bought at this point — and least by the numbers — so a pull-back of 25ish points is not out of the cards.  But the bigger technical up-trend remains intact at this time.

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.