My friends, on Monday, March 28, we went back … to the stock market.
We went from no exposure, whatsoever, to being 90 percent net invested in the ValueAligned® Portfolio and the portfolio for tax advantaged accounts like IRAs, as well as our hedge fund.
The stock market showed enough strength to move our model back to its maximum exposure to stocks, and one of our premiere research consultants, the Hays Advisory, recommended the same move.
My latest video breaks it all down, with charts and graphs and all sorts of visual aids. You can watch it here:
For the last seven years, the U.S. stock market has been in a very strong uptrend, with very few signs of deterioration.
Since the 2011 market correction – which many refer to as an actual bear market – our long term moving average was mostly undisturbed by shorter term trend lines. But the S&P 500 has not made a new high since May of 2015.
The index’s momentum has slowed down, allowing the moving averages to converge. That makes us cautious.
Just two weeks ago, all moving averages were inverted. That was a sign to get out. The last time we would have had a red signal was in June 2008. If we would have gotten out of stocks, then, we could have avoided most of the financial panic that ensued.
So what’s going on, here?
Well, we just experienced what is referred to as a breadth thrust, which enabled our model to make the move that it did.
Strong breadth is a sign that all stocks are participating instead of just a few, and these readings are generally healthy for the market longer term.
It’s the complete opposite of the weak breadth we saw in the early part of last year, when the S&P 500 was making new highs, but fewer stocks were doing the same. Eventually we saw a correction in August 2015, and then another in February of this year.
In the coming weeks, I expect this breadth measure to cool down a bit as market works off its extremely overbought measures.
For those who have been waiting to buy, but haven’t yet, it might be best to wait for a little bit of a pullback.
But for the time being, we are in the market, with 90-percent exposure to stocks.
Questions? I’m happy to answer them, and always available at firstname.lastname@example.org or 732-800-2375.