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Developing Trend?

CAMS Weekly View from the Corner – Week ending 10/25/2019

October 28, 2019

Yet again, our two year trendless stock market is offering signs that it may want to actually put in an upward trend.  To be certain, “signs” does not offer surety as we have seen on different occasions over the past two years.

This time may be different – at least different through our two year lens in that the stock market, via the S&P 500 Index, has developed a propensity to remain above our black line test since mid-summer.

It gets better.

In addition to its relatively newfound resiliency to remain north of our black line (whereby previously it would give mere blips above only to then turn back) structurally speaking the S&P 500 is giving a message that it is on solid ground.

We offer “structurally speaking” in that sector and sub-industry alignment from a price action perspective is supportive of an emerging trend.

Specifically, four key sectors – Industrials, Technology, Financials and Consumer Discretionary – are displaying characteristics that they themselves are putting in strengthening chart patterns that ultimately leads to a break higher.

From a foundational perspective, if these key sectors are able to break higher and trend they will go a long way in providing the strength for the overall stock market to do the same.

$SPX - 10.28.19

Click For Larger View:

The above chart reflects two years of trading for the S&P 500.  The black horizontal line begins at the high mark attained in January 2018 which has turned out to be the end of the trending stock market experienced in 2017.

Since early 2018 the red lines depict our roller coaster experience.  We focus on the aforementioned black line because that is considered the “break out point” whereby if the stock market could eclipse it and continue to move higher a trend would be in place.

At this juncture some digestion may be in order being the above price action has leapt off the black line (for yet another test) and up to previous high levels.  All told, with the aforementioned sector structural support in place, if this market is finally going to trend the current structural set up is nearly as good as it gets.

In addition, this is also yet another message that collective market participants do not agree with the narrative that recession is coming right in front of us.  Market participants are looking out into the near-term and through the message of the stock market’s structural set up are disagreeing with the recession narrative.

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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