Lots of Action Little Change

CAMS Weekly View from the Corner – Week ending 11/13/2020

November 16, 2020

For nearly the past three months now the stock market has been loaded with price action and short term trends.  Through all of it though, with an overall trend perspective in mind, little has changed.

On a personal note I have been intrigued at how many impromptu casual conversations have quickly led to how strong the stock market is and how can this be happening type of tone. 

Taken further, most of the time it is then shared with me how the person in conversation offers that they have their proverbial finger on the sell trigger to clear out of everything.  This usually comes from the angle that the market clearly is not aware of all the problems that exist in our cultural and economic landscape.

Being these are casual conversations and not business/investment discussions I simply hear them out and we, at some point, move on.

If you are even an occasional reader of our Weekly Views you may recognize our well worn trail on this type of topic.

Succinctly here, markets are obsessively forward looking and what is front-and-center to everyday people may be of little concern to them as they are focused on what is coming after that.  This is a very general way of reducing a complex process down to extreme simplicity but it is the bottom line when it comes to markets.

With the above in mind what is equally interesting, as offered at the outset, is that little has changed in the previous ninety days.  Referencing aforementioned casual conversations the tone also offered is that the market has been on a non-stop trend.  This is not the case so below we share a visual to underline our subject title.

Click for Larger View:  http://schrts.co/VFehDbWm

Above is the often reference S&P 500 Index for the previous year.  The red arrows highlight our description above reflecting how the stock market has certainly given price action but overall little has changed.  The blue horizontal line highlights the ceiling the stock market has hit consistently.

Importantly, if the stock market clearly breaks through the blue line and holds those higher levels then that will be a statement from market participants of important changing behavior.  In fact, it will be offering the stock market is ready to trend.

First, it has to break higher and second it needs to hold those levels.  A short term blip on the screen with a quick turn south again will only call into question its strength for trend.

All told, the stock market is quite healthy and inside it the structure is very sound – impressively so in fact.  This type of structural soundness, through the lens of history, implies the market does want to trend higher. 

History offers excellent guidance but it does not come with a guarantee.  Right now we are trendless and are residing at high levels awaiting direction.

For our part we put considerable weight in market structure health.  With sound structural health market participants are offering they see higher trend coming. 

At this stage though it remains prudent to be open minded for either direction until/if the market can prove it is ready to actually trend via its price action.   

I wish you well…

Ken Reinhart

Director, Market Research & Portfolio Analysis

Footnote:

H&UP’s is a quick summation of a rating system for SPX9 (abbreviation encompassing 9 Sectors of the S&P 500 with 107 sub-groups within those 9 sectors) that quickly references the percentage that is deemed healthy and higher (H&UP).  This comes from the proprietary “V-NN” ranking system that is composed of 4 ratings which are “V-H-N-or NN”.  A “V” or an “H” is a positive or constructive rank for said sector or sub-group within the sectors.

This commentary is presented only to provide perspectives on investment strategies and opportunities. The material contains opinions of the author, which are subject to markets change without notice. Statements concerning financial market trends are based on current market conditions which fluctuate. References to specific securities and issuers are for descriptive purposes only and are not intended to be, and should not be interpreted as, recommendations to purchase or sell such securities. There is no guarantee that any investment strategy will work under all market conditions. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market. PERFORMANCE IS NOT GUARANTEED AND LOSSES CAN OCCUR WITH ANY INVESTMENT STRATEGY.