The US stock market, as measured by the S&P 500 Index (S&P), finished the month of May -1.00% below the BLUE LINE, compared to +6.70% above the BLUE LINE at the end of April. We continue to categorize the primary trend as Neutral.
As a quick reminder to our readers, we monitor the relationship between price and the BLUE LINE over time to help identify which stock markets worldwide are experiencing rising primary trends, sideways primary trends, and declining primary trends. We prefer to invest in those markets experiencing rising or sideways primary trends, while avoiding those markets experiencing declining primary trends. The BLUE LINE helps us identify these trends – and when changes may be taking place between them.
THE BIG PICTURE
The weekly* chart below of the S&P shows three changing trends over the past five years. The Green dashed lines highlight a rising trend; the Gray dashed lines highlight a sideways trend; and when pictured, Red dashed lines highlight a declining trend.
Based on the observable pattern above (see Sideways Trend #2?) it currently appears the S&P is likely in a sideways trend. If so, this type of trend can be frustrating for investors as prices tend to rise and decline for an undefined period with little price advancement. While frustrating, we believe sideways trends offer two potential advantages for some investors. First, they may offer strategic target prices to purchase into the stock market with money held in cash equivalents within a stock strategy. Second, for investors who make new contributions to their accounts, a sideways trend can help with the timing of when it may be advantageous to invest the money into the market in the short-term compared to the alternative of making random purchases at any price.
For clients of BLUE LINE INVESTING® please do not hesitate to call us with questions at (833) 258-2583.
* Each vertical line on the chart represents one week of price change.
BLUE LINE INVESTING® (BLI) is an investment process that seeks to align investment decisions with the prevailing primary trend of the financial markets. BLI seeks to remain fully invested when the financial markets are experiencing either a long-term rising primary trend or a short-to-intermediate sideways trend. When the primary trend begins declining however, the process follows a 3-phase sell process to attempt to limit downside loss. We believe Warren Buffett said it best with his two rules: “Rule No. 1 – Never lose money. Rule No. 2 – Never forget Rule No. 1.”
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 BLI. The opinions referenced are as of the date of publication and are subject to change without notice. BLI 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. Forward looking statements cannot be guaranteed.
Advisory services offered through Aptus Capital Advisors, LLC, a Registered Investment Adviser registered with the Securities and Exchange Commission. 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 (251) 517-7198. Aptus Capital Advisors, LLC is headquartered in Fairhope, Alabama.