CAMS Weekly View from the Corner – Week ending 9/30/2022
October 3, 2022
In today’s edition we are sharing for the third time in the previous two months the same view of the stock market using the well known S&P 500 Index. Below is the same chart we have used with sequential additions via narrations and highlights as the previous couple of months have unfolded.
Today we have not added any additional narrations or focal points other than what we had offered the last time we shared it. Time though has added to the price action with another significant message.
To reiterate some of the details that we were offering within this chart over the previous couple of months our blue line, which we morphed into green, is the overarching trend line since the start of this year 2022.
We morphed the trend line to green in our last use of it to highlight our then current iteration of the trend line. Green did not mean proceed without concern but rather emphasized how steadfast this line was and remains so current day.
The blue circle was the focal point of our previous use of this in that we were drawing attention to concerns that the stock market was unable to go up and even touch the blue/green line, as well as the red line. For its part the red line represents the average price of the S&P 500 over the previous two hundred days.
As an aside here today, when X market cannot price itself above its average price of the previous two hundred days you know the market under study is having issues.
Worse, as has been the case for our current day stock market, when the two hundred day average price trend of a market is itself trending down you know the market in question is having notable issues. If this line were a street sign it would mean proceed with caution, if you proceed at all, as the terrain up ahead is fraught with challenges, if not danger.
Adding to the red line messaging within the above chart when a market’s average two hundred day price is trending down and is also below an established downtrend line you know that is market-speak for “I’m seriously struggling here.”
With the above breakdown of the market’s messaging and looking at it as an anatomical structure you would conclude this structure is failing notably and signaling significant future issues. This is why we have shared the above chart multiple times in recent editions to include this one.
They Broke the Line
The working definition of downtrend in relation to market price behavior is an on-going series of lower lows. This is a key attribute of an on-going/active downtrend.
This past week, via our well worn chart above, market pricing added an additional notable behavior marker and with it solidified even deeper the steadfastness of the stock market’s in-place downtrend.
The black horizontal line identified the low point in 2022 for the stock market and should have acted as a foundation/floor if the stock market was going to attempt at holding itself together. As we can see – they broke our black line.
By the close of last week the stock market ended below the black line signifying a new price low for 2022. At this stage, if that black line now acts as a ceiling rather than the previous observed potential floor, we can expect more price challenges to come.
If you are a consistent reader of these editions you will recognize our in-house phrase of “true bear market” and that we have been operating from our true bear market playbook for 2022 for assets under our care.
This simply consists of going to safe harbor type assets when the market is hard trending down and judiciously moving to offense type assets when there is an attempt to move upward in pricing, i.e. counter trend rally(s).
For our part, this past week’s pricing action in the stock market has only added to our true bear market thesis and hence executing from its playbook.
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.
@ The Corner 