Home About Archives RSS Feed

@theMarket: Home on the Range

Bill Schmick

Over the last few months, the stock market has traded in a range that has confounded both bulls and bears alike. Now, we are fast approaching the top of the range once again. Will the averages disappoint once again or are we on the verge of a break out?

We turned to our old friend John Roque, technical strategist at WJB Capital Group, for some insight. Many readers know John either through these columns or because of his many appearances on CNBC and other media outlets.

"The S&P 500 Index has serious resistance at 1,220-1,227 and then 1,250," he says, "Meanwhile, support levels are 1,150, 1,100 and 1,050. However, 950 is not out of the question."

He points to the Dow Jones Industrial Average's 1965-1982 trading range as a period similar to that of today.

"After a turn down from the top of the range, the Dow would revisit the bottom of the range. The only question is what's the bottom of the range?"

When Roque looks at the technical action of the S&P today, he feels a certain sense of déjà vu. The technical action closely resembles two recent downturns in this decade: the decline that started in 2001 (the Dot-Com boom and bust) and the decline that began in 2008-2009.

"The only thing missing from this setup right now is a turndown in the S&P's 12-month moving average. But I think it will happen because the index's rate of advance has almost stopped."

Underneath this week's advance in the averages, Roque was not impressed with the market's internals. Some of the variables he looks at like the market's breadth (the number of stocks that are advancing in price versus those that are declining) are forming a negative divergence among New York Stock Exchange common stocks. The S&P's 500 stocks are also experiencing weakening breath.

"And when net new highs are also in negative territory, I get cautious. The markets have broken their trend lines and momentum is rolling over, which are two major concerns as well," he explained.

In this kind of environment, stability is in high demand. Two sectors where he sees upward momentum are in consumer stables and utilities. Both groups are outperforming the market but Roque points out that usually happens when markets experience steep declines.

Roque's technical view is a bit sobering, especially in the face of this week's euphoria over the coordinated effort by central banks worldwide to bolster lending to European banks (see my column "Deja Vu"). Remember, too, that investors are expecting some major new initiative to be announced by the Federal Reserve this coming Wednesday. Whether the Fed will meet expectations is anyone's bet, but the fact that traders have bid markets higher in anticipation should come as no surprise.

Traders have used recent events — the debt ceiling, the Fed's Aug. 26 meeting in Jackson Hole, European summits, etc. — to manipulate markets prior to these announcements. So far the evidence has not been encouraging. After each one of these events the markets has traded lower after two or three days.

Bill Schmick is an independent investor with Berkshire Money Management. (See "About" for more information.) None of the information presented in any of these articles is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at (toll free) or e-mail him at wschmick@fairpoint.net . Visit www.afewdollarsmore.com for more of Bill's insights.

0 Comments
Tags: debt ceiling, markets, bottom, S&P      
News Headlines
Berkshire Reps Serve Important Roles at Democratic Convention
Hathaway Late RBI Lifts Cages on Road
Rainout Gives SteepleCats Sunday Double-Header
Documentary Explores Good Life in the Berkshires
Chinese Garden Unveiled at Naumkeag
Pittsfield Americans Win Little League Sectional
SteepleCats Lose Pitchers Duel at Joe Wolfe
Cages Baseball Club Edged in Extra Innings
Community Comes Together to Improve Russell Field
SABIC Leaves 'Bittersweet' Parting Gift To United Way

Bill Schmick is registered as an investment advisor representative and portfolio manager with Berkshire Money Management (BMM), managing over $200 million for investors in the Berkshires. Bill’s forecasts and opinions are purely his own and do not necessarily represent the views of BMM. None of his commentary is or should be considered investment advice. Anyone seeking individualized investment advice should contact a qualified investment adviser. None of the information presented in this article is intended to be and should not be construed as an endorsement of BMM or a solicitation to become a client of BMM. The reader should not assume that any strategies, or specific investments discussed are employed, bought, sold or held by BMM. Direct your inquiries to Bill at 1-888-232-6072 (toll free) or email him at Bill@afewdollarsmore.com Visit www.afewdollarsmore.com for more of Bill’s insights.

 

 

 



Categories:
@theMarket (207)
Independent Investor (286)
Archives:
July 2016 (7)
July 2015 (1)
June 2016 (7)
May 2016 (5)
April 2016 (7)
March 2016 (8)
February 2016 (5)
January 2016 (5)
December 2015 (6)
November 2015 (6)
October 2015 (9)
September 2015 (7)
August 2015 (7)
Tags:
Deficit Bailout Stock Market Wall Street Recession Retirement Jobs Congress Europe Interest Rates Debt Europe Housing Japan Commodities Pullback Markets Federal Reserve Banks Selloff Taxes Stimulus Rally Currency Stocks Oil Election Energy Fiscal Cliff Debt Ceiling Metals Greece Crisis Economy Euro
Popular Entries:
The Independent Investor: Don't Fight the Fed
The Independent Investor: Understanding the Foreclosure Scandal
@theMarket: QE II Supports the Markets
The Independent Investor: Does Cash Mean Currencies?
@theMarket: Markets Are Going Higher
The Independent Investor: General Motors — Back to the Future
The Independent Investor: Will the Municipal Bond Massacre Continue?
@theMarket: Economy Sputters, Stocks Stutter
The Independent Investor: Why Are Interest Rates Rising?
The Independent Investor: How Will Wall Street II Play on Main Street?
Recent Entries:
@theMarket: Markets Need to Digest Recent Gains
The Independent Investor: Candidates & the Economy
@theMarket: Markets Make Hay
The Independent Investor: Tax Breaks For College Savings
@theMarket: Historical Low-Interest Rates Prop Up Equities
@theMarket: Fourth of July Started Early for Markets
The Independent Investor: Clicks vs Bricks — Who Will Win the Retail War?
@theMarket: Who Is Next?
The Independent Investor: Pet Insurance & Why You Should Have It
@theMarket: It's Still a Coin Toss