In last months newsletter, I explained that I felt the stock market was at an inflection point. While the S&P 500 was still in an uptrend, several important sectors such as financials and industrials were lagging and sitting right at major support. The risk was that if they would have fallen down through support they had to potential to drag the broader market down with it. Soon after that newsletter went out, those lagging sectors advanced strongly. As a result, the stock market continues to chug higher. This type of sector rotation is positive for an advancing stock market and typical of a bull market.
Stock Market Update
Positive for Stocks
- The long-term trend of the S&P 500 is still up. Until that changes, we are still in a bull market.
- The stock market is making high-highs and higher-lows, the 50-day moving average is above the 200-day moving average and both those averages are trending higher, and today’s market close is less than 1% from it’s all-time high set in January of this year. The bottom line is that we are still in a bull market.
- The weight of the evidence is bullish for the stock market.
I did end up selling some of our weaker stock holdings at the end of June and bought a couple of short position to hedge away some of the short-term risks that I wrote about in my last newsletter. Those shorts were sold at the beginning of July when market technicals began to improve.
Client accounts continue to be highly invested in various stock mutual funds, individual stocks, and stock exchange-traded funds. In addition, I purchased a high yield municipal bond fund today.
The S&P 500 (a proxy for the broader stock market) is trending higher. It has continued to form higher-lows and higher-highs. It’s 50-day moving average is above its 200-day moving average and both those averages are trending higher. In addition, today’s closing price is less than 1% from its all-time high set back in January. The stock market continues to be bullish!
One of the short-term concerns that I highlighted in last months newsletter was that some important market sectors were sitting at an inflection point. The financial and industrial sectors were both sitting on support. Both were substantially lagging the S&P 500 and the concern was that if they broke below support that their fall could be strong enough to drag the broader market down with it.
Both those sectors ended up bounce at this important level, giving investors confidence that the broader market was still healthy. Here is a chart of the financial ETF (XLF) below. As you will notice, it bounced off support and advanced up through its downtrend line.
The advance-decline line continues to trend higher and hit new highs, which confirms the market’s advance.
If you have any questions or would like me to review your portfolio, please feel free to contact me.
Craig Thompson, ChFC
Asset Solutions Advisory Services, Inc. is a Fee-Only Registered Investment Advisor specializing in helping the needs of retirees, those nearing retirement, and other investors with similar investment goals.
We are an “active” money manager that looks to generate steady long-term returns, while protecting clients from large losses during major market corrections.
Asset Solutions is a registered investment adviser. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial adviser and/or tax professional before implementing any strategy discussed herein. Past performance is not indicative of future performance.