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Can This Important Black Line Hold?

CAMS Weekly View from the Corner – Week ending 5/10/2019

May 13, 2019

Just a few weeks ago we addressed the fact that the stock market – over the previous couple of years – has been in a tremendous zigzag pattern whereby excellent upward progress would then be met with notable downside movements.

Through the described process it has left the stock market, via the S&P 500 Index, in a very large range.  This has elicited an overriding question of whether it could break higher, on a trend basis, and in so doing completely leaving said range behind.

Back in April we shared a View whereby, through the lens of history, it is rare – think very rare – to see an upward move unfold whereby the previous high point had been attained so quickly, within an established range, only to continue trending endlessly higher.

History offers in such an instance that some sort of process unfolds whereby the market “proves” whether it is capable of trending higher and ending the established trading range.

For comparative purposes the chart directly below is the chart shared in the aforementioned Weekly View.  The follow-on chart is an updated version as of Friday’s close.

$SPX - 5.10.19 1

Click for larger view:

The second chart speaks to an attempt by the S&P 500 to actually trend but has since “walked away” from the established red uptrend line.  Simply put, the stock market was beginning to look a little tired in its strong upward run.

Now we focus on the same question we asked back in April:  Can the S&P 500 hold above the solid horizontal black line and ultimately trend higher off it or will it yet again succumb to the established historical range of previous couple of years?

If you are a consistent reader of these Weekly Views we will, yet again, beat the drum.  The stock market is historically highly valued and any concern from collective market participants that growth will dissipate, or worse, disappears, frightens them to a point of hitting sell buttons.

While the domestic economic backdrop has remained constructive the global economic backdrop is less than impressive.  With this, it is not a foregone conclusion that the above black line will hold.  The next few weeks should prove to be interesting and quite informative.

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

Portfolio Manager, CAMS Spectrum Portfolio


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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