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Home Stretch

This is the last full trading week of 2019. It may also be the last big push of the year for the markets to move higher.

If futures markets are any indication, there should be a pop Monday morning. This may create additional momentum for the week, pushing the SPX up over 3200.

Given the unusual holiday schedule (with both Christmas and New Year’s on Wednesday), this may very well be the high-water mark for the year. Still, as far as the calendar YTD performance goes, it’s been a heck of a year already.

There really is no ‘resistance’ on the upside right now. With markets essentially at all-time highs, the question is just how high can things go?

And things may go higher than we thought. With trade war talk softening, some of the pricing expectations may be off. IF — and it’s still if at this point — the trade war is going to soften, earnings expectations could benefit. That could mean this bull has room to run. 2020 may be an interesting year…

As far as support goes, around 3130 for the SPX. If this level is breached there may be some additional downside. Odds are portfolio managers are trying to sew up their bonuses for the year, so it doesn’t seem terribly likely we’ll have the bottom fall out of the market.

So while there is never a ‘known’ future for the markets, the set-up looks pretty good. It would take a major shift in market expectations to really throw a wrench in this thing. Folks seem to be asking how much higher this market goes rather when will the next drop happen. So grab some eggnog and cross your fingers – Santa Claus is coming to town 🙂

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.

Sleigh Bells

If you ask the markets, Santa Clause is still on the way, and this rally is still in play.

The technical trends are pretty straight-forward: economic data remains in-line with expectations, and Fed policy is unchanged. It’s a recipe for more of the same. And ‘the same’ happens to be a pretty low-volatility climb higher for the major indexes.

While this run has been exceeded initial expectations, the behavior of things looks like this week may continue higher.

Mechanically, we could see the top of 2019 this week. This is because both Christmas and New Year’s fall on Wednesdays. That means this is really the last ‘regular’ trading week of the year. After that, holidays monkey with stuff.

So enjoy for now. Q1-2020 is bringing not only new earnings, but new speculation as we head into an election year during the greatest bull market in a generation.

For the week, look for support around 3117, with resistance around 3179… if there is any resistance. The only reason the market hasn’t pushed higher is because it’s already at all-time highs.

C’mon Santa Claus Rally!

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.

Beware of Pullbacks

After setting a series of all-time highs it equity markets may be ripe for a trader’s pull-back. This is typical any time there’s been a material run up in the markets.

While the climb has been orderly, the SPX is showing over-bought characteristics at these levels. Based on our numbers, a pull-back toward the 3035-3050 level would be typical after this kind of move.

This pull-back would also be in line with the bigger overall projection for 2019. In fact, based on projections from nearly a year ago (which is so long ago in market time as to be barely relevant anymore), the SPX has exceeded expectations for 2019.

For the week, the market may yet trend higher. In fact, this may be a good week for the markets as it’s the last full week before the holiday season starts to rev up. But things may start to get dicey once we get into the short Thanksgiving week.

Trying to predict how much higher an all-time high trend goes before a pull-back — especially in light of the circus that is Washington these days — is pretty tough. For now, since there really isn’t any ‘resistance’ in this market, we’ll just have to see how over-bought things can get.

“It’s Christmas Theo. It’s the time of miracles,” Hans Gruber, Nakatomi Plaza, 30th Floor

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.

How High from Here?

Last week managed to finish at all-time highs for the SPX. The question now is how high can we go?

While there is no pre-defined limit, our original 2019 projections had 3100 as a likely target. Given current momentum, the SPX may exceed this level either this week or next.

The question will then shift to whether or not we can hang on from here.

If history were to repeat itself, we’ll likely see a bit of a pull-back coming once this initial target is met. The fourth quarter can be tricky though, as holiday rallies are tough to anticipate.

Given the shift away from a more traditional “Black Friday” sales event, it’s possible the big move for this market is happening right now. It’s typical for holiday schedules and window dressing to make for a dicey December.

2019 has been a remarkable calendar year in terms of market performance. Of course, it was a sand-bagged number as the fourth quarter of 2018 really tanked. The technical set-up does not have a major meltdown manifesting in the data yet though. So we may finish with a pretty strong calendar year from here.

Below is a chart of the 2019 projection. Note that 3110 was at the top of the expected range. This does not mean the markets cannot get into rally mode and push past this. It only means the markets would be ahead of expectations – and perhaps a bit over-bought at that point.

The pull-back targets are of bigger concern for most professional investors. How far back is an expected pull-back? Key levels from here would be: 3024/3014/3000/2974/2944.

To put these numbers in context, it’s about a four-percent pull-back. That’s not exactly huge given the moves this year. (Although it would definitely take some of the fun out of things.)

The good news is the end-of-year low target is still about 3010. That’s pretty solid support for this trend.

We’ll see if the Santa rally pushes us to even higher all-time highs. For this week, look for those numbers to push 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.

Trade Winds Improving

Last week markets got a pop on ‘less bad’ trade news as China indicated a partial trade agreement may be on the table. This could mean additional planned tariffs would be suspended.

Markets viewed this as a positive and finished last week with a strong push higher.

While the news is good, the technical set-up for this week may have a quick down-draft to fill in a price gap for the SPX. There is technical support around 2930 or so — right at the 100-day moving average (the 50-dma is only 5 points higher).

Interestingly enough, the market is neither over-bought nor over-sold. It’s pretty much right in the middle of its 21-day trading range. So positive news from here could lead to a push higher (especially if the small price gap created last Friday gets filled quickly this week).

This is the first technical sign that the markets could be setting up for a break-out to the up side in a while. There is still a chance the sideways pattern could simply persist, but the price reversal last week was a good sign the 2900 is significant support for the SPX.

For this week, look for a quick dip down, followed by a potential surge to the up-side. Breaching 3000 on the SPX is possible this week, although it is unlikely the all-time highs will be reached. It would take a more definitive deal with China to spark that kind of 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.

Estimated range of SPX for week of 9/3/19

Uncertainly

A perfect storm of uncertainty seems to be brewing for this week. But that uncertainty does not seem to be the kind that will significantly derail this market — at least not this week. It just adds to the drama.

The set-up for the SPX has about a 100-point range for the week. That’s pretty big – but the test is near the top of the range.

The range is built around the small head-and-shoulders pattern that has been forming over the past several weeks. The left shoulder peaked at 2954. So the movement of the SPX will be interesting here as we approach the potential right shoulder. Do we break up or down from here? (hint: the trend appears to be up)

With Hurricane Dorian slated to hit the East Coast this week, this test could be tricky. While the storm does not change the geopolitical and economic mix much, it will be a meaningful distraction to productivity in an already-shortened ‘back-to-routine’ week (does that even make sense?).

Typically activity picks up in September as kids across the country are back to school. There is no significant holiday between now and Thanksgiving in November. And the shortened work-week post-Labor-Day-holiday often suffers what many shortened weeks do – heightened volatility as the market crams a lost day into 4 (and yes, this is mostly anecdotal, but it certainly ‘seems’ this way).

With Dorian in the mix, the question is also whether or not there will be a measurable impact to the economy in the form of a slowdown in productivity or massive damage that requires repairs.

Bottom line, the international picture has not presented any significant revelation the market is trying to digest. So the news cycle will likely follow Dorian’s impact for this week, with some side discussion about Brexit and interest rates. Throw in some ‘I hate the other team’ political banter, and the week isn’t really that out of the ordinary.

The technical picture, strangely enough, appears to have volatility narrowing compared with prior weeks. The question is more about whether or not the markets find support at these levels and grind higher, or if we stay in a sideways pattern with volatility for a while.

If the story remains unchanged, the support area for the SPX is about 2854, with consolidation happening in the 2900-2950ish range. Resistance isn’t really a factor here – it’s simply all-time-highs. And if those are taken out, that’s a good sign. The concern comes if the market closes below 2825. A breach of this level could mean more significant downside to follow.

For this week, just hang on. There may be a few whip-saws, but the data indicating a more significant decline hasn’t shown itself yet. We’ll see how many headlines traders try to play off of though.

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.