This month’s market update is going to be concise because I believe the most important clue to the market’s future direction is the price action of the major indexes.
Below is a daily chart of the S&P 500 (our market proxy). For the past month, the index has consolidated between support and resistance, much like it did in May. I have notated these consolidation patterns with blue lines.
There were some minor short-term bearish technical issues that I wrote about in our June 21, 2020 update but those have mostly dissipated. Also, I stated that a breakout above the current consolidation pattern would be bullish and that is exactly what happened today.
As long as the index does not fall below 3000, I would view market conditions as being bullish. The reason why this level is important is that, if violated, it would put the structure of the uptrend in question. Meaning that the S&P 500 would no longer be charting a path of higher-highs and higher-lows. It would also mean that major support had been violated and would put the index below it’s 50 and 200-day moving averages. Many traders, myself included, view the market as being bearish when it trades below it’s 200-day moving average.
As long as the S&P 500 is above 3000 the bulls are in control and the odds favor higher prices in the broader stock market. It would take a drop of about 6% from today’s close for the index to drop below that level.
Client Account Update
Most client accounts are approximately fully invested in stocks and bonds.
We progressively added equity positions to client accounts over the past week because of improving market conditions.
If the S&P 500 were to drop decisively below 3000, I would probably look to be more defensive in how we allocate client accounts.
As always, managing risk is paramount and protecting our clients from major losses during sever market corrections is our focus.
If you have any questions, please feel free to shoot me an email.
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.
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