We did get a bullish breadth thrust with the advance off the December lows and this suggests that stocks should be bullish over the intermediate-term.
Short-term breadth, however, is suggesting that the market is ripe for some type of near-term pullback. This can be seen in the recent decline in the number of stocks above their 50-day moving average, a Summation Index which has turned down, and the Arms Index which is sitting at an overbought level.
In addition, we are starting to see underperformance of small and mid-cap stocks, recent downturns in the economically sensitive transportation index and homebuilder’s industry group.
This afternoon we are getting a Fed announcement on rates and that can move markets. Also, these short-term technical signals are just warnings. They need to be confirmed with a move down in the broader stock market (S&P 500 index – our market proxy) which we have not really seen yet.
Unless the technical picture changes, any pullback will be viewed as an opportunity to increase equity exposure.
Summary of How I Manage Client Accounts:
- I do not use a buy-and-hold approach like most financial advisors. I believe this strategy, while good for young investors, can have severe adverse consequences for those in or near retirement.
- I use technical analysis to manage risk and preserve principal during major stock/bond market corrections.
- I have two basic models that I use to manage client accounts. One is conservative and appropriate for investors that are in or near retirement, and an aggressive model for younger more aggressive investors.
- I am a risk manager and will increase our risk level when risk in the market is low, and decrease our risk when risk in the market is high.
If you have any questions, or if you want me to review your retirement account allocations, 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.