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Two Important Lines Continue to Hold

CAMS Weekly View from the Corner – Week ending 11/9/2018

November 12, 2018

We have offered along our observation path of late that there is no better opinion to dial into than the market itself as to what it wants to do.  By focusing on collective market participants conclusions by observing the behavior of market trading we get a sense of what direction they may want to take the market.

There is a vast array of observation tools that assist in this process.  Under the “keep it simple” banner for you dear reader we have offered a weekly observation of the S&P 500.  Today, we will continue with said observation.


Click Link for Larger View:  http://schrts.co/j3LEBw

We first published the above chart back in the week ending October 19th Weekly View.  This chart is a weekly chart (each bar represents one week of trading) and is offered in order to quiet the noise that volatility episodes often bring.

The red line is a rolling 50 week moving average line (average prices of the previous 50 weeks on a rolling basis) that has acted as trend line support throughout the market uptrend.  Short blips below are fine – as recent history reflects – but prices should remain above this line if recent market personality traits are to remain intact.

In addition, the black line acts as a secondary line of support whereby the stock market was able to hold these levels from late spring through the summer.

Since our initial offering of this chart the S&P 500 has been doing some work around both the red and black lines.  What is most important is that through all of the challenges the S&P 500 has been able to hold above both lines.

As offered, dips below are fine which has occurred.  If the dips become steadfast in wanting to remain below both lines then collective market participants are sending us all a message that downside trouble lies ahead.

Inside the market landscape there has been a wealth of damage left in the wake of this volatility episode.  If the damage cannot clean up then these lines will not hold.  That’s a more detailed observation that we will leave in-house so we can stay with the keep it simple view here in this edition.  Watch the lines – the markets will share valuable information for all of us in coming days and weeks.

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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