The US stock market, as measured by the S&P 500 Index (S&P), finished the month of July 8.2% above the Blue Line, compared to 4.2% at the end of June. Price is now above the Green Line, which is above the Purple Line, which is above the Blue Line (the Green and Purple Lines are not shown in the chart below).
BLUE LINE Perspective
Chart courtesy of StockCharts.com
As a quick reminder, the ideal pattern for what I believe constitutes a sustainable, rising trend is when price rises above and remains above the Green Line; the Green Line above the Purple Line; and the Purple Line above the Blue Line. However, if the rise is too “steep,” a price correction may be close at hand. That is certainly possible based on what I am currently observing.
Something that makes this market “tricky” is how much of a price divergence can be observed in each US index. The Nasdaq has climbed to new all-time highs, the S&P 500 is almost back to its previous high, yet the Dow Jones Industrial Average is still 9% below its previous high. This may be an important divergence to monitor over the months to come.
PRIMARY TREND Perspective
At this time, price has held technical channel support which converged with the Blue Line and the top of the rising trend channel. Chapter 6 of my book, titled “When Selling May Be Your Best Option” illustrates several historical stock market price tops. These “channels” illustrated below may prove essential to help investors identify the next stock market price top.
Chart courtesy of StockCharts.com
As a quick reminder, the purpose for providing this primary trend update is to illustrate the BLUE LINE INVESTING® process by applying it to the S&P 500 Index. However, this process is applied to all investments held within our strategies.
Thank you for reading this monthly update, and please do not hesitate to call (833) 258-2583 with questions or if we may be of service.
BLUE LINE INVESTING® (BLI) is an actively managed investment process that pursues our mission by combining a trend following investment philosophy and a “buy low, sell high” investment strategy. Our mission is to grow our client’s financial wealth over a full market cycle in a risk-managed and tax-efficient way.
We monitor the relationship between price and the Blue Line over time to help identify which stock markets worldwide are experiencing rising, sideways, 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.
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.
Guardian Wealth Advisors, LLC (“GWA”) is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about GWA’s investment advisory services can be found in its Form ADV Part 2, which is available upon request.