From the desk of Tom Bruni @BruniCharting
The trend is your friend…but what do we do if there is no trend?
For month’s we’ve been talking about the mixed signals in the US Stock Market. Everything ranging from strength in defensive sectors and bonds to weakening breadth and momentum and major averages all over the world failing to break decisively above their 2018 highs.
Last week prices finally confirmed those divergences and began correcting through price, so where does that leave us?
We put out some stats in early March looking at where various indexes stood relative to key inflection points like the S&P 500’s tops in January and September, and its bottom in December. We asked the simple question, are there more indexes above those key highs (uptrends) or below them (sideways or downtrends)?
Back then it was clear the vast majority were still below those key levels.
Today those same stats show us not much has changed. There may have been some changes around where individual securities included in these stats stand, but for the most part Equities in the US and Globally are not trending higher.
Click on table to enlarge view.
So what does that mean? Until more of these indexes break back above those former highs the tape is likely to be a lot choppier with failed moves occurring in both directions, but we should also remember that this comes within the context of a constructive long-term picture for Equities.
As we wrote last week, if we’re below those 2018 highs in the US Indexes, then near-term risks remain elevated in Equities. Cash is a position and we can err on the long side by looking for stocks and sectors of the market that are staying above their own key levels.
There have been some great pitches over the last 5 months, but since there are fewer today there’s nothing wrong with sitting back and waiting for better opportunities to develop.
This weekend our Institutional Clients will be receiving some additional stats like this applied to different universes, which compliments our short-term momentum report well and will offer more insights into the structural and tactical trends within Equities.
If that sounds interesting to you, then check out our Institutional Page or reach out to us directly for more info.
Thanks for reading and let us know if you have any questions!