Selling smacked the stock market this week. The major indexes have continued marking time by basically moving sideways since our Current Market Outlook signal was downgraded to yellow on Dec. 9th. The high of Dec 9th on the S&P500 of 3,712 and today’s close at 3,714 are almost identical.
The major stock indexes are engaging in a critical test at this very moment. As of Fridays close, the S&P500 ended 2% under its 21 day mav and barely under its 50 day. The Nasdaq was in a slightly stronger position at only 0.70% under the 21 day and 2.8% ABOVE its 50 day mav. Remember that the bullish investor sentiment is so high right now that any negative news, or just plain fear, could trigger a massive wave of “smart money” selling.
Our Current Market Outlook is “Uptrend Under Pressure” with a yellow light. This yellow condition has persisted longer than normal but is now closer (in the realm of time) to a meaningful resolution of the indecision pause and to picking a new direction, i.e. red or green.
On Friday our “Core Four” internal indicators moved to 1 green, 2 yellow, and 1 red. This reflects a slight deterioration in the “math of the market.” We remain defensively positioned in our strategies that we manage for our clients. As a result of that prior positioning, our strategies fared well this week as our cash/ST income holdings had been raised to 50%+ levels, and one strategy even employed a 10% short Inverse ETF as a hedge. Praise God! We remain ready to redeploy capital back into the market quickly if a new positive condition develops.
There’s an old adage on Wall Street that says, “As goes January, so goes the year.” While it is not our practice at TPM to use “old saws” when making reasoned and well research investment decisions, many in the public do consider them. Food for thought: In 2020 the S&P500 had a small loss in January. But for the year it ended up over 16%. HOWEVER, there was that little pullback in March of 2020. (For the record, it was the fastest decline of 35% in US market history!) Maybe, January knew something. 🙂 To be sure, our C.M.O. signal based on the daily math of the market knew something too, as the “footprints of money” alerted us very early that things had changed for the worse. Read about that here and here.
There is another area of life where the above axiom does apply. In politics after a new President takes the oath. This year is no exception, and by the early looks of it, January was a down month based on a record number of Executive Orders, many of them overtly radical. Abortion mandates, energy dependence and job losses, just to name a few, and all within a few short days by the stroke of a pen. The fallout is almost certain. God will not be mocked. Please pray for our President – to acknowledge the sufficiency of Christ and to return to the Word of God as the foundation of his decisions and our society.
What can an investor prepare to do now? Investors that have taken steps to protect by following the initial parts of their “exit plan” need only wait for the market to make up its mind. Their cash cushion is a prize today. It will mitigate losses going forward if the market falls further, or be available to invest in the next batch of leaders as they break out. Focus on the major indexes moving averages as this test unfolds watching for a serious breakdown.
Have a Triumphant day! ®
The information in this article is based on data obtained from recognized services and sources and is believed to be reliable. Any opinions, projections or recommendations in this report are subject to change without notice and are not intended as individual investment advice. Not to be used as legal or tax advice.
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