The long and the short of it all

December 27, 2017No Comments

 

 

The S&P 500 remains in an uptrend, evidenced by higher highs and higher lows on both daily and weekly charts, and its positive slope and price point vs. the 200 day SMA (simple moving average). Further evidence of that longer termed trend remaining in place are the rising cumulative moneyflow trend (bottom pane of chart) and the confirmation of trend by MACD.

Despite the excellent profile of the major trend, I chose to post the daily chart above to point out a few minor cracks in the cement that might suggest a minor, healthy correction into the New Year. I’ll list them below:

 

  • The market is 8% over its 200 day SMA. I consider 10% over that average as a more severe sign of overbought conditions. Nonetheless, the current price is far enough ahead of its 200 day SMA that it can be considered fairly overbought.
  • Moneyflow is showing minor signs of slowing – and not just over the past week of low holiday trading. The bottom pane shows a slight deviation in trend, and the top pane (Chalkins Moneyflow momentum indicator) illustrates that falling moneyflow momentum almost always leads into some type of minor correction.
  • RSI and stochastics show that momentum has reached an extreme. Prices are unlikely to continue their charge without some sort of give-back to correct the velocity of movement.
  • Volatility, when seen on a weekly or monthly chart, is historically low. History shows us that periods of low volatility are punctuated by periods of volatility. Here is my blog with a long termed chart of the S&P 500 illustrating this point.
  • Finally, the S&P 500 is nearing the top of a trend channel.

 

Given the bullish big picture for the markets, I’d use any correction on the market in the coming weeks as a buying opportunity. It might be wise to hold a bit of cash in lieu of that potential.

I won’t be writing another blog this week. So I’d like to pass on to you and yours a very Happy New Year! Thank you for your ongoing interest in reading my musings!

 

BTW—although I rarely mention this, my marketing man here at ValueTrend, Kevin Banbury, prodded me to make mention of our services on this blog. So…

If you have any questions regarding the potential for us managing your portfolio, we are very pleased to discuss them with you. We typically look after families who hold around $500k or more in investments (open accounts, registered accounts combined). Or, if you know of friends and family members who may welcome our more active and analytical approach to today’s uncertain markets– do them a favor they’ll appreciate for decades: give them our website address and suggest they consider our services. If your or they end up contacting us, we will manage your/their money as prudently and conservatively as we do all of our clients.

Of course, we guarantee complete confidentiality.

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