Price
Source: DSHORT Blog, Moving Averages March Month End Update
Jill Mislinski wrote the following March 29, 2018 summarizing the data above:
All three S&P 500 MAs are signaling "invested" and three of five Ivy Portfolio ETFs — Vanguard Total Stock Market ETF (VTI), Vanguard FTSE All-World ex-US ETF (VEU), and PowerShares DB Commodity Index (DBC) — are signaling "invested".Price momentum for the S&P 500 is decelerating from the market high January 26, 2018. As Chris Kimble recently identified multiple stock indices could be simultaneously creating bearish patterns, read his blog post, Stock indices creating look-alike bearish patterns?, for more details on the descending triangle pattern he has identified. The Dow Theory system briefly gave a sell signal Monday, April 9th. To learn more about this pattern read Mark DeCambre's article at Marketwatch, Dow’s Tuesday surge defied a bearish ‘sell signal’ — here’s a theory as to why it happened.
Sentiment
Source: CNN Money Fear & Greed Index
The CNN Money Fear & Greed Index started April with a reading of "Extreme Fear." This indicator has dropped significantly from a reading of 61 at the end of January. At this point I'm watching it to see when it moves away "Extreme Fear" back to "Greed." The graph below plots this indicator from present back to 2015.
Source: CNN Money Fear & Greed Index
Valuation
Source: Hussman Market Comment, April 2018
John Hussman placed this chart in his April 2018 Commentary to show us how overvalued the market remains even after the pullback from the end of January. This chart shows the median price to revenue ratio for the S&P 500 index components (weekly).
Summary
With days to go until the U.S. federal tax deadline, April price action shows three asset classes (VEU, VTI, DBC) as invested and two (IEF, VNQ) in cash according to the Ivy Portfolio system. Sentiment remains extremely fearful. Stocks are modestly to extremely overvalued depending on the measurement criteria you are selecting. Bonds offer limited returns. The stock market has been flirting with breaking below its 200-day moving average. The 5-month monthly moving average remains above the 12-month monthly moving average which signifies that we have not had a "hurricane warning" in the S&P 500. A "hurricane warning" flashes when the 5-month simple moving average value registers below the 12-month simple moving average.
The chart above, click to enlarge, shows how the S&P 500 performed since 1995 with the 5-month monthly moving average shown in red and the 12-month monthly moving average in blue. This is a challenging time for stock investors as the market is consolidating the increase in the market from the US presidential election to January 26, 2018. We're currently playing the waiting game, waiting for economic data to confirm if Q12018 represents an inflection point in the market where we transition from synchronized global growth to a decoupling, slowing economy full of geopolitical risks. Bullish investors must be hoping for a positive earnings season to save this market from breaking down through multiple technical levels. Let's end with this quote from John P. Hussman, Ph.D., President, Hussman Investment Trust, discussing the U.S. market:
"Investment is about valuation. Speculation is about psychology. Both factors are unfavorable here."As always, wise investing my friends.
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.--------------------------------------------------------
Here's what I've been reading recently:
- The 2010s were one of the best decades for stocks ever. Uh-oh. (MarketWatch)
- Gettin’ Tighter: Financial Conditions’ Effect on Stocks (Schwab)
- The stock market is in its 3rd-longest stretch without a new high since 2013 (MarketWatch)
- Schwab Market Perspective: Navigating the Changing Market Environment (Schwab)
- How Much Should You Contribute to a 401(k)? (U.S. News & World Report)
- Many Americans Still Lack Retirement Savings (Federal Reserve Bank of St. Louis)
- Global Debt at Record Level (Bloomberg Bussinessweek)
