Last Thursday’s blog (https://www.valuetrend.ca/?p=2267) noted that a break of the 50 day MA and the 1600 level would suggest a target for the S&P 500 of between 1500 (200 day MA) to 1540 (next support and bottom of trend channel). Beyond the fact that the 1600 level was broken, the weekly chart also shows a rollover of MACD and RSI –here’s my chart from last week updated with those oscillators. These momentum indicators are longer term timing oscillators. They are particularly significant as an indication of longer termed moves when viewed on a weekly chart. The signals from the weekly chart are bearish. So, to answer the headline question for this blog: No, now is not yet the time to deploy your cash.
Near termed oscillators on the daily chart suggest oversold conditions, although they are not near a “hook up” buy signal just yet. This implies a potential for a near termed bounce sooner or later, whenever we get the hook. My guess is, if we get a bounce, it will stall at prior support of 1600. Thereafter, I’d expect a decline to the low 1500’s as mentioned above.
My advice remains to hold some cash until a clear buy signal comes from a bounce off of 1500-1540. Meanwhile, build your wish list of stocks you’d like to buy, and the support levels where you’d like to see them reach and bounce off of. Opportunity awaits for the patient investor.
3 Comments
Hi Keith,
First thank you again for the time you take sharing your advice. I have paid attention and have a decent amount of cash (thanks), but also still have a fairly heavy percentage in dividend payers like pipe lines and telecom. Obviously these have taken a hit and I am concerned. Is the end of the slide near for this area, or is it still a good idea to sell at this time while I still have gains? Any input you can give would very appreciated. Thanks again, and all the best!
Dave H
Hi Dave
There is a secular rotation hapening as money leaves the dividend stocks and slowly is beginnig to move to growth–this is a theme I will watch for going forward. Having said that, the dividend payers (interest sensitive) are oversold–probably the worst has been done. I dont suspect tons of upside or recovery, but I suspect there wont be too much left in downside either.
Despite the recent sell off the much broader NYA Composite index looks more bullish than the S&P. Perhaps more helpful for longer termed investors