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
Williamstown Elementary School Committee Chairman Steps Down
Plunkett School Roof Project to Begin in Spring
Three Resign From Pittsfield's Board of Health
Pittsfield Brightens Up Sick Toddler's Day With Christmas Display
Cheshire Still Unclear On Select Board Increase Process
Greylock Youth Basketball Team Tops Lee
Pittsfield Observes Pearl Harbor Remembrance Day
North Adams Schools Find Taps With Elevated Levels of Lead, Copper
North Adams' E3 Academy Creates Mini-Pantry
High School Athletes Learn Leadership Lessons

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 (213)
Independent Investor (294)
Archives:
October 2016 (1)
September 2016 (9)
August 2016 (5)
July 2016 (7)
June 2016 (7)
May 2016 (5)
April 2016 (7)
March 2016 (8)
February 2016 (5)
January 2016 (5)
December 2015 (5)
Tags:
Fiscal Cliff Stocks Housing Debt Euro Wall Street Interest Rates Pullback Greece Congress Europe Europe Stock Market Japan Stimulus Taxes Federal Reserve Commodities Energy Selloff Jobs Currency Election Oil Rally Economy Banks Markets Retirement Deficit Debt Ceiling Crisis Metals Bailout Recession
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: Day Traders Rule the Markets
The Independent Investor: Dementia & Your portfolio
@theMarket: The Same Old Song
The Independent Investor: The Impact of One Bad Apple
@theMarket: Much Ado About Nothing
The Independent Investor: Woman Need to Invest More
@theMarket: Markets Get Back to Business
The Independent Investor: The VA — If It Isn't Broke, Don't Fix It
@theMarket: A Tale of Two Interest Rates
The Independent Investor: The VA Political Football