Stock Market Update
The support that I indicated was so important in my last few newsletters has held, as we expected, which adds fuel for a bullish resolution to the short-term correction that we have been in since the beginning of February. This short-term pullback should not be a surprise given the parabolic rise of the stock market in January. It is just the markets way of resetting prices down to a realistic level that will create the demand needed to propel stocks upward again.
The S&P 500 formed a double-bottom right at its 200-day moving average and has since advanced above an area of short-term consolidation. The S&P 500 has risen above its 50-day moving average, its 50-day moving average is above its 200-day moving average. Therefore, the long-term trend of the market is up as long as support does not get violated.
I am still of the belief that the weight of the evidence is suggesting that the broad market is only correcting and we are still in a bull market. Things could change and I will continue to monitor market technicals; currently, however, the weight of the evidence continues to suggest higher prices over the intermediate term.
If you have any questions, please feel free to shoot me an email.
The Bottom Line
Positive for Stocks and Commodity Prices
Negative for Interest Rate Sensitive Bonds
• Short-term, the stock market has been correcting within a longer-term uptrend. As long as the S&P 500 does not fall below the February/April lows, the long-term trend is still up.
• Long-term, the weight of the evidence continues to be bullish for stocks. At some point, this will change and when it does, I will have no problem flipping to a bearish bias and reallocating client accounts to a more defensive posture. However, market technicals continue to signal that we are in a bull market and thus we should be invested in stocks aggressively.
• Bond prices have been falling as bond yields have transitioned out of a 37 year period of decline. This trend of falling bond prices will adversely affect retirees for years to come. If you are interested in receiving my E-book (Bonds – A Ticking Time Bomb) on this topic, shoot me an email and I will send it to you for free.
I continue to view stock market risk as low, thus our accounts have high stock market exposure.
We do not hold any interest rate sensitive bond funds.
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.