Internals Weaken But Prices Still Sideways
Market Update
Price action is positive and the long-term trend of most major stock market indexes are up. Below is a daily chart of the S&P 500. The 10-day moving average is above the 50-day moving average, which is above the 200-day moving average. This is indicative of an up-trend.
On a shorter-term basis, stock prices are stuck in a sideways pattern. Below is a one-hour chart (each bar represents an hour of trading). Stock prices have been stuck in this range since July 12, 2016.
Longer-term stock market internals are still strong; however, shorter-term internals (momentum indicators and breadth indicators) have deteriorated since last week. Because of this, odds favor some type of market pullback before heading meaningfully higher.
While price has not broken down yet, momentum and breadth have continued to deteriorate. Below is a chart of the NYSI Summation Index (Breadth Indicator). It is still trending down.
Momentum indicators have also continued to trend down. The 21-Day Rate of Change line has been trending down and is just barely above zero.
The Bottom Line
Bias: Positive for Stocks (no change from last week)
- Stock market price action is positive and will remain so as long as prices remain above the June 2016 lows.
- Market internals suggest a positive environment for stocks over the longer term.
- Some shorter-term market internals are flashing warning signs that we could see some market weakness over the near term. Possibly in the form of a market pullback. However, any short-term weakness has not yet been confirmed by price action.
Stock market momentum has not yet signaled a change in trend, the direction of the market is still up, and price action is still positive. So any warning sign that we are seeing in shorter-term market internals are just a signal to be cautious. Until prices rollover and momentum indicators turn negative, short-term price action remains positive.
Client Update
Client accounts are between 80% to 100% invested in lower volatility funds.
We will be looking to add funds that we have identified as providing attractive risk-adjusted return characteristics once short-term internals turn positive.
For the most part, our accounts have trended up with very minor volatility this year.
Strategy To Maximize Your Social Security Benefits
Have a great day!!
Craig Thompson, ChFC
Email: [email protected]
Phone: 619-709-0066
About Asset Solutions
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.