The BLUE LINE INVESTING™ (BLI)¹ Market View of the
S&P 500 Index² for the month ending January 2018
Commentary:
The S&P 500 Index (S&P) finished the month of January closing 10.81% above the Blue Line, almost 4% higher from 7.32% at the end of December. With the S&P remaining above the Blue Line we continue to categorize the primary trend as Positive. However…
…since 1980, it has been very common for prices to “correct” in price back towards the Blue Line from elevated levels. This is commonly referred to as reversion to the mean. As #RichardRussell of #DowTheoryLetters use to say, the market sometimes acts like a rubber band. As prices advance, trending higher and higher, the rubber band stretches out. But once let go, the rubber band snaps back to its normal state. For us, the normal state or mean of the market is the Blue Line.
Are we at a point now where the stock market, like the rubber band, may snap back? Or could the market produce even higher elevated levels before it forms a top? Time will tell. But we have only found a handful of times since 1980 when price exceeded the Blue Line in excess of the current 10.81% before ultimately correcting back to the Blue Line.
Thanks for reading.
Jeff Link
Disclaimers:
¹ Blue Line Investing (BLI) is an alternative to traditional wealth management. BLI uses a disciplined, rules-based investment process to seek investment opportunities, regardless of whether financial markets are rising or falling. Based on technical analysis research, the process applies trend-following along with observations of economic moving averages of the market and other technical indicators.
² The S&P 500 Index is one of the most commonly followed equity indices, and many consider it one of the best representations of the U.S. stock market, and a bellwether for the U.S. economy. It is comprised of 500 large companies having common stock listed on the NYSE or NASDAQ. The volatility (beta) of the account may be greater or less than the index. It is not possible to invest directly in this index.
Technical analysis is a method of evaluating securities by analyzing statistics generated by market activity, such as past prices and volumes. Technical analysis attempts to predict a future stock price or direction based on market trends. The assumption is that the market follows discernible patterns and if these patterns can be identified then a prediction can be made. The risk is that markets may not always follow patterns. There are certain limitations to technical analysis research, such as the calculation results being impacted by changes in security price during periods of market volatility. Technical analysis is one of many indicators that may be used to analyze market data for investing purposes and should not be considered a guaranteed prediction of market activity. The opinions expressed are those of Blue Line Investing. The opinions referenced are as of the date of publication and are subject to change without notice. Blue Line Investing reserves the right to modify its current investment strategies based on changing market dynamics or client needs.
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. The information contained herein should not be considered a recommendation to purchase or sell any particular security. This information is intended for educational purposes only.
Advisory services offered through Gordon Asset Management, LLC (GAM). GAM is an SEC-registered investment adviser. Registration does not imply a certain level or skill or training. More information about the advisor, its investment strategies and objectives, is included in the firm’s Form ADV Part 2, which can be obtained, at no charge, by calling (866) 216-1920. The principle office of Gordon Asset Management, LLC is located at 1007 Slater Road, Suite 200, Durham, North Carolina, 27703.
