Guilty until proven innocent

The S&P 500, despite the excitement over the post-Brexit monetary easing (BOE stimulus plus corporate tax benefits, along with US fed hold-off on rate rises, again), has not yet taken out 2 significant levels. Until old highs are taken out, it is still a consolidating market. First, it needs to take out the last high which lies just under 2120. Next, it needs to take out 2130 – which was last spring’s all-time high for the index. Meanwhile, the index flirted on the downside with a break of 2000 after declining from the Brexit vote.  The decline took out the prior low of 2030-ish. So we have no higher highs, and the last low was lower than the prior low.  I’ve notated all of this stuff on the chart below.

S&P

Meanwhile, back at the ranch…the defensive sectors Gold, TLT and XLU are rocking to new heights.

goldTLT SHORT

 

 

 

If things are so good, why are these defensive sectors moving up?

 

Take advantage of opportunities

I did take advantage of the Brexit selloff by cashing in – profitably-  on my Inverse ETF’s,  and then buying into some panic-priced equities. However, given the failures of the market to meet my criteria for true bull market conditions–as noted above–I retain a certain level of scepticism as to how long this party will last. For that reason, we’re still almost 25% cash in our equity platform. There may be many more price swings over the coming months to trade – this market remains guilty of a continuation of a sideways consolidation pattern until proven otherwise.

 

BNN

Regular readers know that I am a monthly guest on BNN’s MarketCall shows. BNN has asked me to team up with my Associate, Craig Aucoin on a special MarketCall episode on July 13th . The show airs at 6:00pm.  Craig is the resident Fundamental Analyst here at ValueTrend. ValueTrend is unique in that we separate the two disciplines of Technical and Fundamental Analysis.  Stocks are reviewed independently by each analyst, without interference or influence. Thus, if I pass a stock technically, Craig must then review the stock independently by using his quantitative and qualitative methodology. Only if a stock passes both of our analytics will it go onto our approved list.

 

New articles

Click here to read the latest articles from Canadian MoneySaver, The MoneyLetter and Investors Digest by Keith Richards. New articles just added!

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Click here to view a video by Keith Richards on how to spot depressed stocks looking to turn around.

6 Comments

  • As you say Gold, along with silver are rocking to new highs.

    Question is, in your opinion what is the risk associated with holding both commodities now? RSI is @83. Full STO and Macd are very high, implying they could correct….. even though they continue to rock and even today are gaining.
    So what do you see both short term (next couple of weeks) and longer term few months? Before Brexit I recall many technicians suggesting these commodities were out of favor for the time being.
    Thanks

    Reply
    • I noted to Sudesh that gold is in seasonal favor at the end of the month–so too is energy (oil)–so I am inclined to buy in a couple of weeks, especially if their overbought situations result in a pullback
      I am bullish on both gold and oil. I have a small position (3% of portfolio) in XEG (energy ETF) but otherwise not alot of direct exposure in any commodity–that will change soon I expect, but looking for a door to enter on a selloff. Energy, BTW, is starting to cooperate with such a pullback. My target is $45-$46 for WTI. That would be of interest for me as a potential buy point.

      Reply
  • Gold is way above your resistance level of 1300. Have you changed your outlook on Gold yet, and buying????

    thanks

    Focus Group

    Reply
    • I’m inclined to buy gold again–it does look to have broken out–seasonal’s are best from the end of July so I will likely wait a couple of weeks

      Reply
  • Re:S&P500 2130
    Forward P/E 17 = growth rate / interest rate 1 vs.
    P/E 12 = growth rate / Fed idealized normal Fed fund rate 5.
    S & P 500 should be around 1200 ~ 1500 right?
    Fantasy is it?

    Reply
    • Its a melt up –one reader named Bert had some interesting commentary on the upside, which he felt was going higher–and going to be entirely driven by liquidity – until the music stops….

      Reply

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