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The Stock Market’s Heaviness is Concerning

CAMS Weekly View from the Corner – Week ending 12/14/2018

December 17, 2018

J(This will be the last edition for 2018 as our publishing dates fall right in the heart of the holiday season.  We will see you in early January!)

While overall economic releases continue to reflect a healthy economic backdrop, collective market participants continue to be immersed in concerns to the contrary as they look out into the near-future.  The on-going volatility in the stock market since early October is developing into a propensity to be weak as it consistently gravitates toward the lows of its recent range.

Deep inside the market there are numerous measures that continue to slowly deteriorate rather than slowly improve.  With the length of time this stock market volatility has been happening we should see the opposite whereby market structure measures slowly improve if this experience were nothing other than a relatively short term blip.

Consistent gravitational pulls toward heaviness – after various attempts to right itself via short blips of strength – is historically a “message” collective market participant’s leave in their wake that they have greater developing concerns in their forward outlook.  Propensity toward continued heaviness is historically an unfavorable message.

To underline the above description of blips of strength turning to propensity to be heavy we share two visuals below.  The first is an excerpt from a Weekly View we offered in October where we identified two lines of defense for the S&P 500.  Those lines were shared as support levels that should generally hold if the stock market was merely having a hiccup in its on-going trend.

The second chart is the same chart updated to current day in order to visually compare and contrast what has taken place.  On the second chart we can clearly see the blips higher – if not relentlessness to blip higher – as the “lines of defense” were trying to hold.

As the market story has unfolded it has offered the intermittent strength was merely blips and the propensity to lean toward continued heaviness is the result to this point in time.  Again, historically, this behavior offers concern.

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It is imperative that we see the stock market stabilize at these lower levels to the point of developing an insistence to hold if you will.  Realizing how historically highly valued the stock market is the drop off from here – if it occurs – can be notable.

Can we see the proverbial Santa Claus rally come in here to help stabilize this market?  If so then the front part of 2019 will help fill in the story line.  Importantly, if the Santa rally does not materialize this will be yet another negative message from market participants and will add to concerns as we look into early 2019.

For my part I wish there was a more enthusiastic way to end our last Weekly View of the year but markets give what they give you right.  Regardless, here’s to a Merry Christmas and a Happy New Year for you and yours!

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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