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Breathing Room

CAMS Weekly View from the Corner – Week ending 5/11/2018

May 14, 2018

In the last couple of editions of these Weekly Views we have been focused on the actual trading behavior of the stock market overall via the well recognized S&P 500 Index.

We started with an on-going recognition of this index digesting its previous year-long uptrend by moving in a volatile sideways trend for the bulk of 2018.

This then led to a follow-on piece whereby a caution flag was raised in that the S&P 500 was beginning to develop a propensity to want to go below its well recognized uptrend line.  This uptrend line also coincided with its 200 day moving average which is an often referenced longer-term moving average line that generally helps to identify if a stock or index is acting well.

The basic view on said moving average line is simply if the price of an investment is unable to be above the average prices of its previous 200 days then it may be pointing to a problem.


Click for Larger View:   http://schrts.co/CQXUP4

With the above we continue this multi-week thread of following said stock market behavior.  Last week the tone of our View was caution/concern in light of the S&P 500’s tendency to want to continually revisit the red line depicted in the above chart.

For reference, the blue arrow was the starting point of the first part of this multi-week series.  With the most recent week behind us the trading behavior of the S&P 500 has improved tremendously!  Importantly, this is not just because it went higher.

Far more important is the fact that the red line has, yet again, acted as a solid support level from which the S&P 500 has launched higher off of rather than failing and trending solidly below it.

In addition, by Friday’s close, this is the first close we have seen since this downtrend/digestion period began in late January whereby the S&P 500 was able to trade above a developed downtrend line depicted by the black downward trending arrow.

With this achieved we now will be looking to ensure the S&P 500 is able to stay above this downtrend line.  If the stock market is pointing to healthier behavior then staying above this line will be one of the traits we should see to confirm its behavior has changed for the better.  We will watch closely and share accordingly.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio

Footnote:

H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP).  This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”.  A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.

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