The S&P500 Is A Hot Mess

JC Parets
March 13, 2019

Some people actually think this world is just filled with rainbows and butterflies and stocks are always supposed to go up. I never understood that ignorance. Sometimes stocks go up, sometimes they go down and sometimes they go sideways for a while. It will take you less than 5 minutes of market history research to understand this very simple fact.

Of those 3, I would argue we are in the 'sideways for a while' category in U.S. Stocks, particularly the S&P500.

A lot of smart people I talk to are pointing to this resistance near 2810-2820 where overhead supply has overwhelmed demand since October. We have now failed there 4-5 times, depending on your count:

For me, it's a little more complicated than that:

1) Prices are near a flat 200 day moving average. This is a classic characteristic of a sideways range.

2) Even if prices are able to get above that, there is still more work to do from resistance based on the January & October 2018 highs, just 100 points higher.

Listen, 100 points is a 100 points. Depending on your time horizon, that may be a lot. Speaking from a more intermediate-term perspective, I think we need to watch market breadth. Only 13 of the 57 US Sectors/Sub-Sectors we cover are positive since January 2018 and just 6 since September. This is a 'market of stocks', and not just a stock market. Meaning, as we see more stocks and sectors taking out the Jan & Sept/Oct highs, then we can expect the indexes themselves to follow. At this point, it's the opposite. We're expecting more of a struggle.

We have to invest in the market we're in, not in the one we want. That's just life.

Do you agree? Disagree? Let me know

JC

 

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