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These Lines Need to Hold

CAMS Weekly View from the Corner – Week ending 8/16/2019

August 19, 2019

Post Federal Reserve comments our central focus has been if market participants will retract the entire summer rally having been built on the expectation of on-going cuts.  Would taking away the expected cuts lead to market participants taking away the rally they had created? 

The above is an excerpt from our previous Weekly View and takes us directly to the focal point of recent stock market behavior.

After the Federal Reserve’s most recent meeting stock market participants have continued with their volatile downside trading.  The central observation point relative to the stock market currently is will the summer rally be able to hold or will it be erased.


Click For Larger View:  http://schrts.co/FtDZDvKU

The above is a well worn chart here in our Weekly View’s dating back to the fall season of 2018.  Numerous lines have been added as an on-going narrative unfolded.

This is two years worth of trading depicted.  The red lines clearly reflect the roller coaster ride the stock market has been on in this time frame.

The horizontal black line is considered the break out point.  It begins at the high point in early 2018.

For the stock market to trend this line should be surpassed and not revisited again.  This has not been the case.  Currently the S&P 500 is on its 3rd attempt of surpassing this black line and failing to continue with its trend.  Not good.

The newly added blue arrow line speaks to our header excerpt in that its starting point is the beginning of the summer rally in early June.  If the S&P 500 fails to hold the black line and simultaneously fails the blue line market participants will be offering a high likelihood the summer rally will be erased.

The stock market is at a crucial point in its trading.  To fail the above lines yet again would be a very important message from collective market participants that all is not well.

As the fall season of 2018 reminded us when the stock market begins a downtrend in earnest it can go much further than most expect.  For now we are watching closely to see if the above lines can hold.

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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