The Bottom Line
Bias:
Long-Term Positive and Short-term Positive for Stocks.
- Long-term, the stock market is in an uptrend and looks strong.
- Short-term, the stock market has advanced out of a period of consolidation which began at the beginning of March. This is positive from a price action perspective. In addition, short-term market internals turned positive about two weeks ago.
Client Update
We made substantial changes in client accounts two weeks ago due to improved short-term stock market conditions.
Client accounts are mainly invested in Preferred Income Funds and Equities. Most accounts still have a small amount of cash that should get strategically invested in the coming days.
Market Technicals
Stock Market Price Action
Positive Long-Term
Positive Short-Term
Long-Term Price Action – Positive
The stock market is above both it’s 50 and 200-Day Moving Average (see chart below). This is indicative of a long-term uptrend.
Short-Term Price Action – Positive
The stock market began a period of consolidation that started March 1, 2017. This consolidation formed a wedge pattern that was resolved to the upside, which is bullish.
Stock Market Momentum – Positive
Most momentum indicators are positive. Below is a chart of the S&P 500 in the upper panel and two momentum indicators in the lower panels.
When the Rate-of-Change Indicator (second panel) drops below zero it is a signal that short-term momentum has turned negative. Conversely, when it crosses up above zero, it is suggesting that short-term momentum has turned positive. It recently advanced above 50 signaling a positive momentum shift.
In addition the Moving Average Convergence Divergence – MACD) turned positive at about the same time as did the Rate-of-Change Indicator.
Stock Market Breadth – Positive
Below is a chart of the S&P 500 Summation Index along with the S&P 500 in the panel below it. The Summation Index turned down in early March and fell as the stock market weakened. The Summation Index turned up recently and is now trending higher, which suggest positive short-term market breadth.
Market Sentiment – Negative
Below is a chart of the 10-Day Moving Average Put/Call Ratio. I have inverted it so that the peaks and valleys match up with the S&P 500 in the lower panel.
This ratio is an indicator that shows put volume relative to call volume. Put options are used to hedge against market weakness or bet on a decline. Call options are used to hedge against market strength or bet on a market advance. Sentiment is deemed excessively bearish when the Put/Call Ratio is trading at relatively high levels, and excessively bullish when at relatively low levels.
Currently there are a lot more Call options being bought which is Bearish from a sentiment perspective.
If you have any questions, please feel free to contact me.
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.
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.