The BLUE LINE INVESTING® PRIMARY TREND Update: September 2019

“The only thing that is constant is change”
– Heraclitus

The US stock market, as measured by the S&P 500 Index (S&P, see the chart below), finished the month of September +3.60% above the BLUE LINE, up from +2.70% above the BLUE LINE at the end of August. We continue to categorize the primary trend as Neutral primarily due to price behavior remaining within what we believe to be a sideways trend.

 

Chart courtesy of StockCharts.com

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.

 

SPECIAL UPDATE: THE DOW JONES INDUSTRIAL AVERAGE

The weekly* charts below are being presented to illustrate two potential short-term trends we are currently monitoring within the sideways trend in the Dow Jones Industrial Average. As always, we suggest you click here to familiarize yourself with last month’s comments before reading further.

 

The potentially unfavorable short-term trend

Chart courtesy of StockCharts.com

 

As can be seen above in the upper right-hand corner, price is once again at the top of what we believe to be a sideways trend (identified by the sideways, dashed gray lines). However, almost every weekly price rise since early August has stopped underneath the rising red dashed line. IF this price formation is in fact what is called an Ascending Wedge, we do not believe you should be surprised if the stock market experiences a price correction over the coming weeks. We alluded to this possibility in a previous post, and that potential still exists.

If prices do correct, we do not believe it will result in a change in trend. We continue to believe the sideways trend is currently dominant, and therefore expect price to continue to remain rangebound between 27,000 on the top and approximately 24,000 on the bottom, identified by the gray-dashed lines.

 

The potentially favorable short-term trend

Chart courtesy of StockCharts.com

Alternatively, the chart above shows the possibility of a new rising trend within the sideways trend, identified by the rising green dashed lines. IF prices correct soon and do not decline below the 25,500-price level, it could lend support to this possibility. But even if they do correct below the 25,500-price level, it is still possible for price to decline to as low as the 24,000-price level without the primary sideways trend changing.

With that said, price is currently above the BLUE LINE, which we believe is positive. But that could change in the short-term, and if it does, we suggest you continue to ignore the media narrative and stay focused on the primary trend. We believe it will eventually change to a rising – or declining – trend. Until that time, we patiently wait for the market to provide further hints as to which one it may be.

Thank you for reading the BLUE LINE INVESTING® PRIMARY TREND update, and please do not hesitate to call us at (833) 258-2583 with questions or if we may be of service.

Jeff Link

 

Disclaimers:

 * 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.