Weekend Stock Market Outlook

Stock Market Outlook For The Week of
July 28th = Uptrend

INDICATORS

ADX Directional Indicators: Uptrend
Price & Volume Action: Uptrend
Objective Elliott Wave Analysis: Uptrend

COMMENTARY

No change in the signals; bullish price action for the ADX, price/volume, and OEW. If you're paying attention to the earnings game, it was an exciting week; big moves among the popular names (Google for instance).

Technical analysis of daily SPX prices

2019-07-28 - SPX Trendline Analysis - Daily

The daily and weekly chart shows the S&P 500 ($SPX) back at all time highs.

Technical analysis of weekly SPX prices

2019-07-28 - SPX Trendline Analysis - Weekly

Even with that price level, and an economy that continues to grind along, the U.S. Fed is considering pre-emptive rate cuts to decrease the likelihood of a future recession. With that as a backdrop, Ray Dalio published an article on LinkedIn (you can read the article here), discussing market cycles and their effects on returns from different types of investments and asset classes.

    Over my roughly 50 years of being a global macro investor, I have observed there to be relatively long of periods (about 10 years) in which the markets and market relationships operate in a certain way (which I call “paradigms”) that most people adapt to and eventually extrapolate so they become overdone, which leads to shifts to new paradigms in which the markets operate more opposite than similar to how they operated during the prior paradigm.

    Identifying and tactically navigating these paradigm shifts well and/or structuring one’s portfolio so that one is largely immune to them is critical to one’s success as an investor.

But why now? Per Ray:

    In paradigm shifts, most people get caught overextended doing something overly popular and get really hurt. On the other hand, if you’re astute enough to understand these shifts, you can navigate them well or at least protect yourself against them.

    I think now is a good time 1) to look at past paradigms and paradigm shifts and 2) to focus on the paradigm that we are in and how it might shift because we are late in the current one and likely approaching a shift.

Need something visual? Check out that run! (chart courtesy of JP Morgan Asset Management)

Visual representation of S&P500 returns

"Buying and holding" equities has crushed it for over a decade. So it's highly likely many investors are overweight equities and underweight other asset classes. And who could blame them?

But under the surface, low rates have contributed to an explosion in corporate debt...mainly the kind one level above 'junk' (or non-investment grade). Even worse, some companies are unable to generate enough profit to pay their debts...even with record low interest rates. Government debt levels around the world are astronomical. Some have even suggested that those debt levels are no longer relevant because the government (at least in the U.S.) can just print more money to cover them...indefinitely. A new paradigm indeed.

Ray's article is worth a look, and at the end, he gives his opinion on what asset classes should perform well. The time to prepare for an emergency is before the wheels fall off, so to speak. So now is a great time to ask yourself am I diversified? How do I decide how much money to allocate to other asset classes? How will I decide when it's time to reallocate? Who can help me make those decisions?



If you find this research helpful, please tell a friend. If you don't find it helpful, tell an enemy. I share articles and other news of interest via Twitter; you can follow me @investsafely. The weekly market outlook is also posted on Facebook and Linkedin.

Charts provided courtesy of stockcharts.com.

If you're interested in learning more about the relationship between price and volume, or how to find and trade the best stocks for your growth strategy, check out this book on Amazon via the following affiliate link: How to Make Money in Stocks: A Winning System in Good Times and Bad. It's one of my favorites.

For the detailed Elliott Wave Analysis, go to the ELLIOTT WAVE lives on by Tony Caldaro.

Once a year, I review the market outlook signals as if they were a mechanical trading system, while pointing out issues and making adjustments. The goal is to give you to give you an example of how to analyze and continuously improve your own systems.


IMPORTANT DISCLOSURE INFORMATION
This material is for general communication and is provided for informational and/or educational purposes only. None of the content should be viewed as a suggestion that you take or refrain from taking any action nor as a recommendation for any specific investment product, strategy, or other such purpose. Certain information contained herein has been obtained from third-party sources believed to be reliable, but we cannot guarantee its accuracy or completeness.
To the extent that a reader has any questions regarding the applicability of any specific issue discussed above to his/her individual situation, he/she is encouraged to consult with the professional advisors of his/her choosing. Invest Safely, LLC is not a law firm, certified public accounting firm, or registered investment advisor and no portion of its content should be construed as legal, accounting, or investment advice.
The material is not to be construed as an offer or a recommendation to buy or sell a security nor is it to be construed as investment advice. Additionally, the material accessible through this website does not constitute a representation that the investments described herein are suitable or appropriate for any person.
Hypothetical Presentations:
Any referenced performance is “as calculated” using the referenced funds and has not been independently verified. This presentation does not discuss, directly or indirectly, the amount of the profits or losses, realized or unrealized, by any reader or contributor, from any specific funds or securities.
The author and/or any reader may have experienced materially different performance based upon various factors during the corresponding time periods. To the extent that any portion of the content reflects hypothetical results that were achieved by means of the retroactive application of a back-tested model, such results have inherent limitations, including:
Model results do not reflect the results of actual trading using assets, but were achieved by means of the retroactive application of the referenced models, certain aspects of which may have been designed with the benefit of hindsight
Back-tested performance may not reflect the impact that any material market or economic factors might have had on the use of a trading model if the model had been used during the period to actually manage assets
Actual investment results during the corresponding time periods may have been materially different from those portrayed in the model
Past performance may not be indicative of future results. Therefore, no one should assume that future performance will be profitable, or equal to any corresponding historical index.
The S&P 500 Composite Total Return Index (the "S&P") is a market capitalization-weighted index of 500 widely held stocks often used as a proxy for the stock market. Standard & Poor's chooses the member companies for the S&P based on market size, liquidity, and industry group representation. Included are the common stocks of industrial, financial, utility, and transportation companies. The S&P is not an index into which an investor can directly invest. The historical S&P performance results (and those of all other indices) are provided exclusively for comparison purposes only, so as to provide general comparative information to assist an individual in determining whether the performance of a specific portfolio or model meets, or continues to meet investment objective(s). The model and indices performance results do not reflect the impact of taxes.

Investing involves risk (even the “safe” kind)! Past performance does not guarantee or indicate future results. Different types of investments involve varying degrees of underlying risk. Therefore, do not assume that future performance of any specific investment or investment strategy be suitable for your portfolio or individual situation, will be profitable, equal any historical performance level(s), or prove successful (including the investments and/or investment strategies describe on this site).


Sponsored Links