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Keep Your Eyes On The Fed

The SPX may be in a sideways pattern, but the short-term momentum has shifted to the positive. Now all the analysts come out of the woodwork to try and explain why. Here’s the simple thing to do:

Watch the Fed.

If the news cycle isn’t going to change what they’re doing, odds are, the market shakes it off in short order and resumes its current trend.

This trend is not on fire. It is not likely to spike higher in the near future. No, it’s likely to keep grinding higher and higher — likely to and through all-time-highs — as the year moves on toward 2020.

Why? Because the macro story is unchanged. And we’ve beaten the drum enough — still in expansion, growth slowing, international growth slower than US growth, international rates negative, US rates ultra-low. All of this still forces money into the more conservative pockets of the US stock market – which creates a bid that keeps things from breaking down too quickly.

It’s still a TINA story — there is no alternative — and until we have a reason to change, we’ll press on.

Look for the SPX to challenge — and likely close above — the 3000 level for the week. Support is at the 100-day moving average around 2915. Any trading above this range is simply… ‘normal.’

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.

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.