Looking at the Weekly chart of the SP500 you can see that with the close Friday we are no better off than we were at the end of February. The SP500 has traded between a high of 2,134 and a low of 2,039 over the past 15 weeks, yet here we sit unchanged for more than a 3 months.
Something constructive we can take away from the recent sideways trading is that prices have been able to hold (on a weekly closing basis) above the February and March highs. We can also see steadily higher trending ranges. There has certainly been a fair amount of top calling recently as well as a bullish cohort expecting a breakout higher, however sustained momentum in either direction has been lacking.
While the Bears continue to point to any divergence they can find and all the reasons the market should crumble, there remains a strong demand to buy any and every dip. This underlying support for stocks continues to force the trend higher albeit at a snail's pace.Until the Bears can produce some consistent pressure and begin to break trailing support levels, the benefit of the doubt has to be given to the Bull camp and long-term uptrend.
Another key hint that the market is not currently high risk is to look at the status of a group of moving averages. Switching back to a Weekly chart, this is how the SP500 looked during the most recent market peak in 2008:
With that in mind, here is a look at the market's current posture with relation to these same moving averages:
While no indicator is perfect in terms of its predictive ability, having a process that aligns you with the dominant trends will be the most effective way to approach the markets over the long-term. There will be false signals and shakeouts along the way (see 2010 and 2011 for examples of this), but by simply not over-thinking or attempting to outsmart the market you will improve your returns dramatically.
--We had one exit for our Lg-Cap Portfolio this week. We received stop signals for Boeing (BA).
I still am constructive long-term here as the trend is still higher overall, but for our purposes its time to transfer the short-term risk to someone else.
Our remaining holdings are listed in inverse order to their current performance within our Portfolio. As always we will start with our laggards:
Tight trading ranges near highs are often bullish, but we will simply have to wait and see.
The decline found buy support right near our stops and then bounced back to finish above the 20 WMA. As far as we can know it appears the trend is still intact, but if something were to change in the next couple weeks we will act accordingly and cut our risk. For now we still hold the position and have quite substantial open gains even if a $62 stop violation occurs, so we can afford to be patient.
We will keep our stops at the range lows and look for a positive resolution higher as long as those lows are intact.
Just for perspective the SP500 is currently up 1% in 2015. SBUX is +27% YTD. These are the moves we want to catch and hold onto for dear life. We have done that all year long and I see no reason to quit now. Stops can trail to $46.90. If you are trading SBUX more aggressively I also think $49 on the Daily timeframe is an excellent stop location.
Disney is currently +17% YTD
--The bottom line is the market sits 1% off all-time highs, this is not a bearish indicator. The trend is higher, swing lows are intact and many stocks remain in market leading posture. It is our job to find those winning stocks and get on for the ride. Once the tide actually begins to turn then we can look at the Bearish case. Anyone who is telling you "this is the top" or "the market is going to crash soon" is lying and trying to scare you into an emotional decision.
The truth is nobody knows what the future holds. All we can do is position ourselves as correctly as possible in relation to the market's overall direction. That direction is clearly higher and you should be shaping your strategy around that reality. Predictions, opinions and beliefs are not an investing strategy. It has been proven throughout history that humans are terrible at predicting financial markets, why do you think this time is any different?
Have a strategy that aligns you with the dominant trends in the market; Be invested while the market goes up and protect capital when it goes down.
GL trading! -ZT
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