March Winds Bring May Flowers

MarketCycle Wealth Management

 

 

In this early May posting, I will briefly show the markets via a handful of charts.

The S&P-500 has recently gone through another prolonged sideways market; the market spends half of its time moving sideways and this is why investment accounts should always hold some interest and dividend generating assets.  The market has melted down and then melted up and then melted down during this most recent sideways market; another name for this is volatility.  As I keep repeating, extremes in one direction lead to extremes in the other direction.

 

In the near term, the S&P-500 naturally wants to head up toward 3125 where it might gyrate up and down in a narrow range for months, all while making a series of slow motion (bullish) higher-highs (see purple dashed line).  It is crucially important that the S&P-500 eventually gets above this ‘3125’ line that is shown below.  And longer term, the S&P may be in the process of creating a brand new trend channel (between the two dashed black lines) which could create a bullish path that might lead it higher for another 10 years.  We will eventually know if this scenario plays out.

 

As predicted, it appears that we got an unusual “V” shaped bottom to this bear market.

 

The all important breadth indicator, the S&P Advance-Decline Price Line, suggests that we remain in a long-term Secular Bull Market for stocks.  If this indicator (blue line) refuses to drop when the stock market itself drops (grey line), then higher prices are usually ahead regardless of any pullback.

 

Inflation (purple line below), which has been dropping for two years(!) is now trending higher again (see far right on chart) and this is because of the huge amount of recent ‘money printing’ by global governments and Central Banks.  This is a positive for the stock market and for commodity markets, but too-high inflation may be a major problem during the decade that begins in 2030… but that is not a worry for today.

 

And finally, Bitcoin is still stuck in its multi-year holding pattern, waiting for hints as to which further direction it must take, up or down.  It could resolve in either direction, but the path of least resistance is down and I personally would not buy at these prices… $5500 looks like a possible entry and that would be a 50% drop from today’s price.

 

SUMMARY:  The stock market normally leads the economy, both up and down, by many months because the stock market looks into the future and prices itself accordingly.  Economic data always looks at the past, what has just happened, because we always have to wait for the data from the prior month or quarter to be released.  Right now we are experiencing a continued bull market in stocks because stocks currently see better times ahead… and the economy itself may start to noticeably pick up during the third quarter.  Although the recent job losses may be even higher than reported, a full 90% of these unemployment cases are expected to be re-hired by this time next year.

3125?  MarketCycle re-evaluates everything on a daily basis, but when the S&P-500 hits 3125, I will be taking an extremely hard look in an attempt to see what might come next.  It is vitally important that the S&P-500 gets above this 3125-ish number (by that time, the number might actually be a bit higher, perhaps at 3140 since this important overhead resistance line is slightly sloping upward).

RETEST?  In my opinion (and despite the popular views on the subject) there will be no retest of the March lows.  In fact, I currently believe that we might not see those lows again during the remainder of my lifetime (and I plan to live a long time).  So… breath deep and relax.

 

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MARKET CYCLE  —  DUAL MOMENTUM  —  TREND FOLLOWING  —  LOW VOLATILITY  —  HEDGE FUNDS

 

 

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MarketCycle Wealth Management | Stephen Aust
MarketCycle Wealth Management, LLC is a Registered Investment Advisor. Information presented is for educational purposes only, is not considered an individualized recommendation or personalized investment advice, may not be suitable for everyone and does not intend to make an offer or solicitation for the sale or purchase of any securities. All investments involve risk and unless otherwise stated, are not guaranteed. Past performance or performance charts are not a guarantee of future performance. Portfolio performance charts are shown net of fees so the management fee, brokerage fees, trading fees and ETF fees have already been subtracted. Current performance may be higher or lower than that shown and differing accounts may show different results. Investment returns and principal value in client accounts will fluctuate. All expressions of opinion are subject to change without notice in reaction to shifting market conditions. Be sure to consult with a tax professional before implementing any investment strategy.