I am changing the format of our newsletter slightly to try to make it easier to read. Since most people just want a quick synopsis of our view on the markets and how we are invested, I have moved these sections to the top. In addition, I am putting my bias on the market technicals sections so you can quickly determine our bias on these market internals without having to read the entire section. In addition, if you want the definition of one of the technical sections, you can left-click on the heading to access the definition. I hope this format is more reader friendly.
The Bottom Line
Bias: Positive for stocks and High Yield Bonds
- While stocks are short-term overbought, and could pullback to some degree, a pullback would be viewed as a buying opportunity as long as the lows of early November are not violated.
- Market internals are positive and odds favor higher stock market prices.
- Treasury Yields are in a steep advance that has Treasury Bond prices in a strong downtrend.
TD Ameritrade accounts are between 80% – 95% invested. Since our last newsletter, we added some High Yield and Emerging Markets High Yield Bond Funds. In addition, we are still holding between 35% – 55% in Equity Funds.
Stock Market Price Action – (Positive)
The S&P 500 (chart below) fell about 1% last week and bounced off support (previous high) today. The weakness we saw last week was minor relative to the advance that began early November.
The S&P 500 is above both it’s 50 and 200-day moving averages and both those averages are trending higher. This is characteristic of positive stock market action.
The Russell 2000 (Small Cap Index) has also advanced strongly above previous highs (chart below).
Stock Market Momentum – Positive
The Force Index, which is a volume-based momentum indicator, turned positive in early November as signaled by a move up above the zero line. As you will notice in the chart below, the Force Index has done a good job of confirming market advances and declines.
Stock Market Breadth – Positive
Below is a chart of the NYSE Summation Index (in the top panel) and it is trending up and is above its 10-day moving average. Historically these advances have accurately signaled recent market bottoms.
Treasury Bond Update – Negative
While stocks have been trending up, Treasury Bonds have been in a steep downtrend. Below is a chart of TLT (a Treasury Bond ETF), and it has lost about 16% from its peak on July 8th through today’s market close.
Retirement Investing Webinar
We are working on a webinar that will be ready within the coming weeks. Availability is limited, so signup now if you are interested. Just reply to this email indicating your interest, and we will make sure to notify you once the webinar is scheduled.
If you have any questions, 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.