From my January 2022 update: “…when price rose above this channel after the first quarter of 2021, history suggests one of two likely outcomes. First, price could continue rising higher for the indefinite future. Or second, price could fall back inside this channel and eventually drop to the lower, green-dashed line.”
So, as of February month-end, which of these two potential outcomes appears to be playing out? While I believe it is still too early to arrive at a definite conclusion, price currently appears to be falling back inside the primary trend channel.
PRIMARY TREND: RISING
Chart courtesy of StockCharts.com
All BLUE LINE INVESTING® clients were emailed my SPECIAL REPORT on January 6. In that report I explained why I believe falling back inside the trend channel is a potentially big development. For those readers who are not clients I’ll simply say it opens the door for price to potentially decline to the lower, green-dashed line – an additional 22% price drop from here.
When it comes to making investment decisions, I believe it is important to use multiple witnesses. In my SPECIAL REPORT I said the following about the Dow Jones Industrial Average (DOW):
“IF the Dow declines below and remains below the 34,000 – 34,500 price level over the coming weeks or couple months, I believe the likelihood of continued price drops will be high.”
On February 28th the Dow closed at 33,892. If the Dow doesn’t rally soon, that witness appears to be suggesting lower prices ahead as well.
THE “BLUE LINE”: A CLOSER LOOK
Chart courtesy of StockCharts.com
The S&P finished the month of February at the Blue Line, compared to 2.6% above the Blue Line at the end of January. Most of our investment strategies have increased holdings of cash and cash equivalents since the beginning of the year as well as the percentage to Inverse ETF’s that so far have been rising as stock markets have been declining. This has helped provide some protection to account values during the recent decline.
If you are not currently a BLUE LINE INVESTING® client and do not understand how your investment strategy may perform if prices continue to decline, I am currently offering a complimentary review of your investment account(s). Please call (833) 258-2583 to take advantage of this offer.
Jeff Link
Disclaimers:
The BLUE LINE INVESTING® (BLI) investment process was founded on over 95 years of stock market history. It seeks to identify and align investment decisions with multiyear trends. Various aspects of this process have been illustrated in my book Protecting The Pig: How Stock Market Trends Reveal the Way to Grow and Preserve Your Wealth.
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.
GWA-22-17
