The BLUE LINE INVESTING® PRIMARY TREND Update: June 2020

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The US stock market, as measured by the S&P 500 Index (S&P), finished the month of June 4.2% above the Blue Line, compared to 3.4% at the end of May. The Green and Purple Lines (not shown) are both now beginning to rise above the Blue Line, which I believe is encouraging.

 

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.

Last month I shared some historical statistics regarding the 1930 and 1940 price rallies. As a quick reminder, price rose 6% above the Blue Line on the 1930 price rally and 4% on the 1940 price rally, then declined thereafter. So far price has risen 9% above the Blue Line on this rally in 2020. So, are we out of the woods yet? Not necessarily.

 

PRIMARY TREND Perspective                

Chapter 5 of my book is called The “Faces” of Risk (due out August 26th) and therein I provide three typical examples of the types of price corrections the stock market has experienced over the past 100 years. Based on what I am showing below, I would normally characterize this as a Channel Correction. Based on how I am identifying the trend below, you can see that price rose rapidly late last year to draw investors into the market at higher prices, then dropped precipitously thereafter. Price broke down through the upper trend channel to a “new” lower trend channel. Since then it has experienced a sharp price bounce back above the “upper” trend channel. However, in my opinion there are at least two significant concerns to be mindful of currently.

First, with price having risen to a new high this year and having declined below the price low of last year, this has created what is called an outside reversal to the downside. On an annual basis, this has not happened since 1792! In other words, this is very rare and suggests caution.

Second, at this time, price is converging with the Blue Line and the top of the rising trend channel. Historically speaking, this is where risk tends to increase. If price declines back below the Blue Line, the probabilities increase that it should at least decline down to the middle green-dashed rising line, if not even the lowest green-dashed line over the months ahead.

 

Chart courtesy of StockCharts.com

 

While I have not stated so previously, the purpose for providing this primary trend update is to illustrate the process I apply to all investments held within the BLUE LINE INVESTING® strategies. I simply use the S&P 500 Index to illustrate the process in real time.

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

Also, additional information will be forthcoming on my book in the coming weeks.

 

Jeff Link

 

Disclaimers:

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.

GWA-20-07

 

The BLUE LINE INVESTING® PRIMARY TREND Update: May 2020

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The US stock market, as measured by the S&P 500 Index (S&P), finished the month of May 3.4% above the Blue Line, compared to 1.3% at the end of April. While price has begun to rise above the Blue Line, the Green and Purple Lines (not shown) continue to remain below or at the Blue Line.

 

BLUE LINE PERSPECTIVE

Chart courtesy of StockCharts.com

 

As a quick reminder, the ideal pattern for what we believe constitutes a sustainable, rising trend is when price is above the Green Line; the Green Line is above the Purple Line; and the Purple Line is above the Blue Line. At this time price is above the Blue Line, the Green Line is at the Blue Line, and the Purple Line remains below the Blue Line.

Since 1926, I have identified five instances where one of our indicators (not shown) has behaved similarly to what has transpired over the past few months. These instances occurred during calendar years 1930, 1940, 1962, 1987, and 2009. Of these five, the two that I believe are most relevant are 1930 and 1940. While I realize this is not a large sample size, I want to share some additional insight based on what I have written above.

During 1930, price rose 6% above the Blue Line on the rebound. The Green Line rose above the Blue Line as well, but the Purple Line did not. The S&P eventually rolled over and declined to new price lows over the ensuing months.

During 1940, price rose 4% above the Blue Line on the rebound. The Green Line once again rose above the Blue Line, but the Purple Line did not. The S&P eventually rolled over and declined to new price lows over the ensuing months.

While it is still too early to come to any conclusions at this time, I continue to believe caution is warranted. While there are no guarantees the S&P will repeat the past, I believe these patterns can help with investment decisions, especially those involving the stock markets.

 

PRIMARY TREND PERSPECTIVE        

What I see from the rising trend channel below is that it appears the price decline of March was a type of Channel Correction; a concept I discuss in Chapter 5 of my book due out the end of August. If this trend channel is identified correctly, it could help identify when the trend is turning negative in the future (whether measured in months or years). I believe this can help investors identify when to sell some or all of their stock investments to attempt to preserve their wealth during such periods.

 

Chart courtesy of StockCharts.com

 

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

Jeff Link

 

Disclaimers:

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.

GWA-20-04

 

 

 

 

The BLUE LINE INVESTING® PRIMARY TREND Update: April 2020

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The US stock market, as measured by the S&P 500 Index (S&P), finished the month of April 1.3% below the Blue Line, compared to -13.6% at the end of March. Even with a sharp price rally during April, the S&P has only retraced back to the Blue Line and has not exceeded it.

 

BLUE LINE PERSPECTIVE

Chart courtesy of StockCharts.com

 

Historically speaking, a sustainable rising trend tends to display the following pattern: Price above the Green Line; the Green Line above the Purple Line; and the Purple Line above the Blue Line (always in that order). At this time, price is below the Blue Line, but above both the Green and Purple Lines (not shown). Until the historical pattern manifests, I believe caution is warranted.

 

PRIMARY TREND PERSPECTIVE        

Attempting to identify primary trends can be challenging at times, and as new information comes to light, existing trend channels should be reevaluated. The rising primary trend channel shown below has been updated dating back to 2008.

 

Chart courtesy of StockCharts.com

 

What I see from the rising trend channel above is that for the better part of the past eleven years the S&P has remained within the top portion of a broad rising trend. With the March downturn, price declined to trend channel support (identified by the red circle) and bounced off it. However, the S&P continues to remain below the Blue Line, and if that continues over the coming weeks or even months, I believe a retest of the March price lows is likely.

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

Jeff Link

 

Disclaimers:

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.

GWA-20-02

 

 

 

The BLUE LINE INVESTING® PRIMARY TREND Update: March 2020

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What we learn from history is that people don’t learn from history

Warren Buffett

 

The US stock market, as measured by the S&P 500 Index (S&P), finished the month of March 13.6% below the Blue Line, compared to -4.20% at the end of February.

 

BLUE LINE PERSPECTIVE

Chart courtesy of StockCharts.com

 

On February 28th, the S&P triggered the first phase of our sell process—a Phase 1: warning. Six days later, the S&P confirmed the second phase of our sell process—a Phase 2: failure. This price behavior allowed us to make strategic changes to our strategies in accord with our sell process.

As I explained to a client a few weeks ago, we never know the reason why price corrections occur until after the fact. But what we can always monitor is the price behavior of what “smart” investors are doing in anticipation of potential price corrections. This belief is what our three-phase sell process is based upon.

With the sharp price correction beginning from Phase 2 instead of Phase 3, this leads me to believe two things. First, this price correction may be limited to a relatively short period—one measured in months, not years. Second, prices are likely to decline further before the final price low takes place, possibly during the second quarter of 2020.

 

PRIMARY TREND PERSPECTIVE        

The rising primary trend has been modified from last month to include price information dating back to 2009. This view shows price has now broken down through trend channel support and has “bounced” to test it from underneath. (Refer to the red circle.) With trend channel support broken, the door is now open for the possibility of new lows.

 

Chart courtesy of StockCharts.com

 

Remember, it’s difficult for an investor to attempt to “buy low” if they remain fully invested. As a reminder to all clients, the BLUE LINE INVESTING® strategies are not fully invested at this time, and we continue to look for historical patterns that have evidenced a sustainable price bottom may be in place. At this moment, indicators are becoming encouraging, but the evidence is still lacking. Divergences abounded at the price bottom in 1987, 2003, and 2009. If history repeats, I would not be surprised to see new all-time highs in the US stock markets over the coming years.

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

Jeff Link

 

Disclaimers:

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.

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.

ACA-20-79

 

 

BLI March 24th Special Update

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Strategy is about making choices, trade-offs.

 –Michael Porter

 

Over the past few days, I have received several calls from clients asking similar questions. So, I want to take this opportunity to provide what I hope is a comprehensive response in case you have similar questions.

Excessive Hedge Fund Leverage

Since my last post it has become more evident that several hedge funds have been overleveraged, likely in attempt to maximize performance returns over the short-term. (To read a brief definition of what a hedge fund is, please click here). These hedge funds have been wrong with their investment opinions and have suffered significant investment losses.

This is what I meant when I referenced this being a liquidity crisis in my previous post. The use of leverage has caused them to face margin calls, forcing them to sell any and all financial assets to meet those margin calls. This is part of the reason why this decline has been so swift and ferocious.

I believe the good news is the selling is clearing out the leverage, and when complete, may eliminate a significant source of the current selling. At some point, I expect the stock market to experience a price bounce, which may be beginning today. However, this does not necessarily mean stock prices are going to rise straight up from here. Let me explain.

Understanding deleveraging and forced liquidations

I believe there are at least two aspects of this market you need to understand. First, several hedge funds are closing their doors and going out of business. Others have stopped allowing investor redemptions at this time and intend on selling remaining financial assets over time to return money back to fund investors.

Second, unlike hedge funds who can prevent shareholders from making redemptions, mutual funds cannot. When investors want to sell their mutual funds—for whatever reason—the fund must return their money. So, when some investors panic and place orders to sell their shares, it may cause a negative impact on every investor in the mutual fund. The mutual fund manager may not want to sell, but if they don’t have enough cash to meet redemptions, they have no choice, and are forced to liquidate investments at lower prices. This is one reason why I have not been a fan of some mutual funds for many years now. If this happens, the fund is not left with any cash to buy into the market at lower prices unless new investors add money to the fund through new purchases.

Understanding Investor Psychology

When the stock market experiences a price “bounce” from a price low, investors are likely to react differently. For instance, the hedge funds who are desperately trying to eliminate their margin calls and leverage would like nothing better than a rising stock market to sell into. So, if a price rally occurs, it may be temporary and met with additional selling. Some mutual fund investors who are scared may be inclined to sell more shares on a price bounce out of fear the market may continue to go lower. But those investors who have limited their losses will want to buy in at what they hope to be lower prices.

Remember, as profit-seeking investors, we must consider the psychology of other investors as we consider our own investment decisions.

Strategy considerations

With our strategies currently invested as they are, we have options. One option to consider is to look for a potential bounce, should one occur, and buy additional inverse ETFs at higher prices, if, and only if, we believe prices will continue to decline thereafter.

Alternatively, if prices continue to decline, a different option is to begin selling inverse ETFs and cash equivalents and accumulate stocks, attempting to fulfill the “Buy low” part of “Buy low, sell high.”

Finding “the bottom”

One long-time client asked recently how to identify “the bottom.” Unfortunately, without a crystal ball, we can’t. However, there is a pattern that I have observed and documented that happens from time-to-time in the stock market, that at least suggests the likelihood of a price low. This pattern occurred during the 1987 stock market correction and at the 2009 price low, in addition to other price corrections over the years. While there are no guarantees the pattern will manifest during this decline, it is what I will be diligently looking for over the coming days and weeks as I consider additional investment decisions.

Remember—our strategies have so far limited investment losses compared to the broad stock markets. This could allow us to eventually recover these losses without the need for the stock market to go back to their recent highs. I don’t believe we have to find the bottom—we just need to look for evidence that the likelihood of a low has taken place. This could help us make more profitable investment decisions going forward.

Thank you for reading this special update, and please do not hesitate to call (833) 258-2583 with questions or concerns.

Jeff Link

 

Disclaimers:

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.

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.

 

ACA-20-70

BLI Mid-March Special Update

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Fear defeats more people than any other one thing in the world.

– Ralph Waldo Emerson

  

I am providing this special update to all BLUE LINE INVESTING® (BLI) clients with hope of helping calm any fear and anxiety during these turbulent and concerning times. To all non-client subscribers, I hope some of my comments benefit you as well.

Since the brief private email sent to BLI clients the other week, I have been hesitant to post comments because I want to be confident that what I am sharing with you is as true and accurate as possible. There is a lot of information being passed around, but I am unsure how much is truly accurate. I want to stress the importance of being very careful of what you read and choose to believe, especially from the MSM. Their news headlines and stories tend to promote greed or fear, both of which can be very detrimental to your long-term investment success. Consider the following headline for example:

 

 

I pulled this from a CNBC article published just four months ago. Stop for a minute and let that sink in—just four months ago the media only talked about a rising market. Today, all they talk about is a declining market. All they are doing is stating the obvious. Where is the value?

 

What I believe is taking place

Based on sources I believe to be reliable, I believe we are dealing with a liquidity crisis. As I understand it, there are an unknown number of bad loans that have been made in the global marketplace, some of which are defaulting. The resulting financial losses to certain organizations and institutions are forcing the sale of anything and everything to raise cash. This would help explain why many domestic stocks, international stocks, commodities, cryptocurrencies, and currencies other than the US dollar, are currently declining.

 

Why price movements are so large

I believe the market is experiencing a “no-bid” situation. This means there are no buyers—only sellers. When this happens, price movements can be substantial. Price will fall until a level is reached where buyers step in. But remember—just because the stock market is declining doesn’t mean BLI stock strategies are declining by the same percentage.

 

Actions taken within the BLUE LINE INVESTING® strategies

In the December 2019 primary trend update, I stated I was concerned about the “steepness” of the price rally. If you would like to read that article you can find it here. While our strategies underperformed the market during 2019, part of that was due to our willingness to hold cash equivalents in our stock strategies out of concern of what I believed could be a temporary price top.

In February, the market gave us a Phase 1: WARNING! of a possible change in trend. Shortly thereafter, the market experienced a Phase 2: FAILURE. The use of inverse ETFs within the BLI strategies has helped insulate some of the price decline compared to the broad stock market indexes. This action is not preventing the decline of our strategies but is helping reduce the magnitude of the price decline.

At the time of this writing, all BLI strategies currently have one inverse ETF along with 20-25% invested in cash equivalents. Our strategies are risk managed, meaning there will be times—like now—when our stock strategies are not fully invested. It is very difficult to attempt to “buy low” if you remain fully invested. If you remain fully invested, you have no option other than to go along for the ride—for better or worse.

 

What I am currently monitoring

While the stock market may seem chaotic at times, I believe it is our goal to try to find the hidden order within the chaos. While there are never any guarantees of success, I believe it can help us make more informed, and hopefully profitable, long-term investment decisions. At this time, it appears the stock market may be experiencing what is called an Elliott Wave 5 Wave correction. The image below illustrates what this may look like:

For those readers who want to read more about this formation, please refer to section 4.5 here. At this time, I believe the current stock market decline is following the black portion of the image above. Based on my calculations, all three of the major US stock market indexes—the Dow Jones Industrial Average, the S&P 500 Index, and the Nasdaq Composite Index—have followed the same wave count up to this point in time. As of the market close on Friday, it may have completed counter-trend wave #4.

 

The first wave down (labeled #1 above) was -15%.

The counter-trend wave (labeled #2 above) was +10%.

The third wave down (labeled #3 above) was -21%.

The next counter-trend wave (labeled #4 above) was +10%.

If this pattern plays out, we are next awaiting the fifth wave down (labeled #5 above).

 

IF we reach the target price suggested by wave 5 above, it is my current intention to remove all inverse ETFs and purchase additional stock investments. I believe that could be a reasonable price to buy “lower.” Of course, this is subject to change without notice, and I will make all decisions based on information that is available at that time.

In the past I have made reference that when price rises to high above the Blue Line, it has the historical tendency of acting like a stretching rubber band that eventually “snaps back.” This tendency can also take place once price had declined substantially below the Blue Line. Sometimes the rubber band snaps back quickly, while other times it does so more gradually. Needless to say, I personally believe prices are likely to be higher in the coming months compared to where they are now, but prices may decline further in the short-term before they may begin to turn up.

 

Additional Comments

At this time, the BLI strategies are predominately invested in Index exchange-traded funds (ETFs). They do not currently hold any individual stocks, and this is by design. Individual stocks can go to zero. The main stock market indexes can not (unless the whole financial system collapses, which I do NOT believe is likely to happen). In addition, it is much easier to add a protective hedge in the form of an inverse ETF to a comparable ETF, compared to the alternative of trying to protect individual stocks. For the most part, that is very difficult.

So much of what I have written in my book covers much of what the markets are experiencing at this time. If everything goes according to plan, it should be published and available for sale the first week in August. I hope you will pick up a copy and reflect on what has been happening over the past six months.

I have further comments I would like to share, but I do not believe it prudent to write them publicly. This may sound strange, but I believe the current decline may be a gift—at least for those investors who did not chase into the rising market last year and remained fully invested.

Don’t despair, and to the best of your ability, do NOT allow headline news to sway your opinion or emotions. Remember, when it comes to investing, one plus one does not always equal two. There are reasons the stock market may be doing what it is doing, for reasons I have not seen anyone in the media discuss. While that does not ensure what I believe will come true, we are weathering the storm better than some. The Financial Times reported over the weekend that Ray Dalio’s largest hedge fund has lost 20% of its value as of the end of last week, and that is before the additional losses of today.

Thank you for reading this special update, and please do not hesitate to call (833) 258-2583 with questions or concerns.

Jeff Link

 

Disclaimers:

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.

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.

ACA-20-61

The BLUE LINE INVESTING® PRIMARY TREND Update: February 2020

/in , /by

“What determines your wealth is not how much you make

but how much you keep of what you make”

– David Bach

 

The US stock market, as measured by the S&P 500 Index (S&P), finished the month of February -4.2% below the Blue Line, compared to 6.20% above it at the end of January. With last week’s price decline, a Phase 1: WARNING! has been triggered, warning that a potential change in trend is now possible, but not necessarily probable.

 

BLUE LINE PERSPECTIVE

 

Chart courtesy of StockCharts.com

 

I have removed the downward-sloping red-dashed lines from last month’s blog because of concern they will cause more confusion than clarity. So, I will simply show this chart going forward as a simple way to illustrate whether the S&P is trending above, at, or below the Blue Line. Remember, the S&P is the primary US stock market index, and other investments tend to trend in a similar direction.

 

PRIMARY TREND PERSPECTIVE   

               

Even after last week’s price decline, price still managed to remain within the broad rising trend shown below (modified slightly from January’s update). As a result, I continue to view the current primary trend as a rising trend. However, with the decline, the market is currently at a crossroads. Based on technical analysis, price now finds itself within both a potential declining and sideways trend, in addition to the rising trend illustrated below. Over the coming months the market is likely to reveal which trend is the primary trend.

 

Chart courtesy of StockCharts.com

 

In my opinion, price would need to decline below trend channel support, identified in the chart above as the lower green dashed line, for a more significant price decline to occur over the coming months. Two potential forms of price decline that could occur here would be a Channel Correction or a Trend Correction, concepts that will be illustrated and explained in Chapter 5 of my new book due out the first week of August.

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

Jeff Link

 

Disclaimers:

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.

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.

ACA-20-49

The BLUE LINE INVESTING® PRIMARY TREND Update: January 2020

/in , /by

“The only thing that is constant is change”

 – Heraclitus

The US stock market, as measured by the S&P 500 Index (S&P), finished the month of January 6.2% above the Blue Line, compared to 8.40% at the end of December. As such, we view the current primary trend as a rising trend.

 

BLUE LINE PERSPECTIVE

Chart courtesy of StockCharts.com

 

However, last month I expressed my concern that the 4th quarter 2019 rally appeared very “steep.” Unless the S&P is about to break out and rise much higher, this “steepness” may be warning of a temporary price “top.” IF that proves true, there are only two other directions the stock market can go: sideways or down. In the chart above I have added downward sloping arrows to highlight possible price targets if the stock market continues to decline over the coming weeks or months.

Something else worth taking notice of is the divergence that took place on January 22nd. The S&P and the NASDAQ made new price highs, but the Dow Jones Industrial Average did not.  The reason this may be important, at least in the shorter-term, is the last time I recall this happening was at the price bottom in January 2016. During that month, the S&P and the NASDAQ made new price lows, but the Dow Jones Industrial Average did not. Therefore, if a price rally does not materialize relatively soon, the market may retrace some of the price advance from last year.

 

PRIMARY TREND PERSPECTIVE                  

 

To better align this monthly update with both our process and my book scheduled to be published this summer, I will use the following chart going forward to illustrate and monitor the primary trend as we view it.

Chart courtesy of StockCharts.com

 

The two rising dashed green lines represent the primary trend. In the past few years, each time price rose to the top line labeled “Trend Channel Resistance,” shortly thereafter it experienced a price correction. As of today, price is turning down once again from that green line where the red down arrow has been circled. Will it drop all the way back to the bottom of the channel, or even break down through it? Stay tuned to find out over the coming months.

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

Jeff Link

 

Disclaimers:

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.

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.

ACA-20-22

The BLUE LINE INVESTING® PRIMARY TREND Update: December 2019

/in , /by

“The only thing that is constant is change”

– Heraclitus

The US stock market, as measured by the S&P 500 Index (S&P), finished the month of December 8.40% above the BLUE LINE, compared to 7.10% at the end of November. As such, the current primary trend is categorized as a rising trend.

 

BLUE LINE PERSPECTIVE

Chart courtesy of StockCharts.com

As a quick reminder, 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.

At the present time, my primary concern pertains to the “steepness” of the current price rise. Just two years ago the S&P experienced a steep rise where price exceeded the BLUE LINE by almost 13%, right before it experienced a violent price correction back to the BLUE LINE. Please refer to the red circle on the chart below, courtesy of StockCharts.com.

 

Chart courtesy of StockCharts.com

 

Whether the US stock market is currently rising because of “a good economy”, capital flight out of the Eurozone, or some other reason entirely, sharp price rises tend to be followed by sharp price declines. While the past does not have to repeat, I believe this bears close monitoring over the coming weeks.

 

TOP HEAVY(er?)

In a special report published to this blog on November 15, 2019, a reference was made to the top five largest stocks in the S&P 500 Index measured by market capitalization. If you would like to read it, please click here. Out of the 505 stocks that comprise the S&P, Apple, Inc. was the second largest at that time with a weight of 4.34%. In other words, price changes to Apple stock alone will likely impact the price of the index to a larger degree than the combined smallest 100+ stocks of the index.

Chart courtesy of StockCharts.com

As of the end of December, Apple now represents the largest weight in the S&P. Of the 30 stocks that comprise the Dow Jones Industrial Average, Apple is now the third largest priced stock and represents 6.97% of that index. And of the 100 stocks that comprise the Nasdaq 100, Apple is also the largest weight, representing 11.6% of the index. This information is as of December 31, 2019 and can be found at www.slickcharts.com.

It is interesting to note that Apple’s stock price is trading 31% above its BLUE LINE, which according to the BLUE LINE INVESTING® process is high. This is being pointed out to illustrate that the major US stock indices are becoming more top heavy with each passing day.

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

Jeff Link

 

Would you find this service more beneficial in video format? If so, please let me know by sending an email to Info@BlueLineInvesting.com. I am considering changing format to a Zoom presentation to narrate this in the future for further clarity.

 

Disclaimers:

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.

ACA-19-42

 

 

The BLUE LINE INVESTING® PRIMARY TREND Update: November 2019

/in , /by

“The only thing that is constant is change”

– Heraclitus

 

The US stock market, as measured by the S&P 500 Index (S&P), finished the month of November 7.10% above the BLUE LINE, compared to 4.91% at the end of October. The primary trend is currently categorized as Positive.

 

BLUE LINE PERSPECTIVE

Chart courtesy of StockCharts.com

 

As a quick reminder, 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.

 

TREND CHANNEL PERSPECTIVE

Last month I mentioned I was cautiously categorizing the primary trend as positive. With several client inquiries I will clarify what I meant by that, by putting the current stock market trends into context with the past. Please review the chart below of the S&P 500 Index from 1965 through 1969.

Chart courtesy of StockCharts.com

When looking at the five-year chart above, what you see is a rising trend channel labeled “A” that experienced a price correction labeled “C” in 1966. When the price correction completed, a price rally resumed forming a new rising trend channel labeled “B.” As prices rose, they were stopped by the previous green dashed line, identified by the three gray arrows. Thereafter, price corrected further down to the lowest green dashed line to establish the new rising trend. Price bounced off that green line and rose higher, eventually experiencing a “price top” in late 1968, declining thereafter. The S&P 500 lost over 25% of its value when the trend changed and declined from late 1968 into 1970.

How does the current trend today compare to the mid-to-late 1960’s? Please review the chart below of the S&P 500 Index from 2015 through today.

Chart courtesy of StockCharts.com

When looking at the five-year chart above, what you see is a rising trend channel labeled “A” that experienced a price correction labeled “C” at the end of 2018. When the price correction completed, a price rally resumed forming a new rising trend channel labeled “B.” With this year’s price rally, price has been stopped at the previous green dashed line, identified by the three gray arrows. So, if history decides to repeat itself, it is possible for price to correct down to the lowest green dashed line at some point in the months ahead to establish the new rising trend. Unless the S&P 500 eventually rises back into the original trend labeled “A”, I believe the danger increases that the market could form at least a temporary top within the next year or two, like the late 1960’s. If this occurs, a sell process could come in handy to attempt to limit investment loss should price decline below and remain below the BLUE LINE.

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

 

Would you find this service more beneficial in video format? If so, please let me know by sending an email to Info@BlueLineInvesting.com. I am considering changing format to a Zoom presentation to narrate this in the future for further clarity.

 

Disclaimers:

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.

ACA-19-20

 

 

 

A BLUE LINE INVESTING® SPECIAL REPORT: November 15, 2019

/in , /by

“The only thing that is constant is change”

– Heraclitus

 

TOP HEAVY?

Today while performing my weekly research, I came across what may be an important factor regarding the current stock market rally. With the media continuing to announce new highs almost every other day (even if prices rise by only a few points), I was curious to see which specific stocks may be contributing the most in the current price rally. Please refer to the screenshot below that highlights the top five stocks by market weight for the S&P 500 Index as of the close of trading on November 14, 2019. All information is courtesy of SlickCharts.com (www.slickcharts.com).

From the data above, you can observe that of the 505 stocks that comprise the S&P 500 Index, 15% of the current weight of the index is comprised of only 5 stocks: Microsoft, Apple, Amazon, Facebook, and Berkshire Hathaway. Using the BLUE LINE INVESTING® process, Microsoft’s share price is currently trading 15% above its BLUE LINE; Apple’s is 26% above its BLUE LINE; Amazon is 2% below its BLUE LINE; Facebook is 7% above its BLUE LINE; and Berkshire Hathaway is trading 6% above its BLUE LINE. While three of the five are trading within what our process considers “healthy” ranges, Microsoft and Apple are not. As a quick reminder, in February 2018 the S&P 500 Index rose almost 13% above its BLUE LINE, right before experiencing an 11% price correction.

My intent for this special report is not to make a prediction of what may happen next. The market may very well continue to rise in the short-term. Or, at some point it may experience a sharp price correction. Historically speaking, the higher price continues to rise in relation to the BLUE LINE with such a concentration at the top, the greater the risk of at least a price correction.

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

 

Do you find this commentary beneficial? If not, please let me know how it can be improved. Please send an email to Info@BlueLineInvesting.com.

 

Disclaimers:

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.

ACA-19-13

 

 

 

The BLUE LINE INVESTING® PRIMARY TREND Update: October 2019

/in , /by

“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 October up 4.91% above the BLUE LINE, 0.36% higher compared to the end of September. We cautiously categorize the primary trend as Positive due to recent price behavior.

 

BLUE LINE PERSPECTIVE

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.

 

TREND CHANNEL PERSPECTIVE

While performing research for a project to be announced next year, I discovered the following potential channels within which the S&P 500 Index may be trending. If you observe this chart from the left and move to the right, you may notice how price tends to act like a ping-pong ball and “bounces” between the top and bottom of the channels. Sometimes price breaks out into a higher channel above the previous one, while at other times it breaks down into a lower channel.

Chart courtesy of StockCharts.com

 

One potential risk that may occur sometime in the future is for price to decline and “retest” the lowest rising green dashed line. That support line dates to early 2016 and while it does not have to happen soon, or even at all, I believe investors should be mindful of its possibility over the coming months.

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

 

Do you find this commentary beneficial? If not, please let me know how I can improve it. Please send an email to Info@BlueLineInvesting.com.

 

Disclaimers:

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.