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CAMS Weekly View from the Corner – Week ending 5/4/2018

May 7, 2018

Propensity – a natural inclination or tendency – has become a well respected word around here in that it perfectly describes, at times, a certain market behavior that may be positively or negatively oriented.

Interestingly, upon hearing this word applied to certain market behaviors frequently enough our ears perk up with heightened awareness.  This auto-response if you will is born from a respect for the reliability of the market behavior when we hear ourselves assigning this word to said behavior frequently enough.

On the positive side we see our anticipation grow with what may be to come and how we can seize the developing opportunity while on the negative side our concern grows which offers a potential need for adjustments to portfolio posturing.  In today’s scenario, unfortunately, it leans to the negative side of market behavior.

S&P Support 200ma - 5.7.18

For the second week in a row we show a chart of the S&P 500 stock index dating back to late fall of 2016.

The central focus here is the red line which represents the 200 day moving average of the S&P 500.  This moving average line is simply the average of the previous 200 days of closing prices on a rolling basis.  In chart analysis, remaining north of this line is a well recognized measure as to whether a stock or market is performing well.

In the last year-plus for the S&P 500, this line has also represented a well-establish uptrend line whereby breaking it would offer real concerns of potential trend change for the stock market.

For reference, the blue arrow points to last week’s View and the concerns we offered at that time.  A week later we see, yet again, the S&P 500 wanted to go down to the red line.

The propensity of the S&P 500 wanting to continually revisit this important line increases our concerns that it wants to break it to the downside.  This would not guarantee trend change but would increase concerns notably of that potential – hence our vigilant watch.

This past Friday the stock market ended the week with a strong day and in so doing was able to lift itself off the red line.  What should occur for this market to get healthier in its behavior is to put this red line in its rear view mirror while it trends upward.  Until then, “propensity” will continue to be our operative word and with this said concerns will remain until and/or if the market can get its upward trend action back intact.

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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