As readers of my blog know, I like following moving averages for the market. At the end of May the 12 and 10 month moving averages suggested to be invested in stocks not cash. Furthermore the 5-month moving average crossed above the 12-month moving average for the first time since September 30 2015.
As we discussed in the April Market Update, momentum can beat fundamentals. Currently the low interest rate environment is forcing investors to seek return from expensive stocks. At some point this relationship will break. In the current bull market the levels on the S&P to watch are 2130, 2150 and 2200. Monthly closes above those levels will reinforce the momentum trade and could push this market closer to the 2007 overvaluation levels (of course not coming close to the overvaluation we saw in 2000). As I've said a few times be careful deploying capital into this market and remember we'll probably have better entry points as we complete this business cycle. Consider this a good time to raise some cash.
Please consult a qualified financial advisor before making any investment decisions. This blog is for educational purposes only and does NOT constitute individual investment advice.
