NOW vs. THEN
The S&P 500 peaked 185 days ago on January 26, 2018. As shown in the chart below, the S&P 500's 200-day moving average (red) has a positive slope, the 50-day (blue) has a positive slope, and the 50-day is above the 200-day. The 50-day moving average recently printed a new all-time high. The facts we have in hand as of 1:25 pm ET on July 30 tell us the intermediate and long-term trends remain favorable.
The chart below shows the S&P 500 185 days after the October 2007 peak. The S&P 500's 200-day moving average (red) had a negative slope, the 50-day (blue) had a negative slope, and the 50-day was below the 200-day. The 50-day moving average had recently printed a new low. The facts we had in hand 185 days after the 2007 peak told us the intermediate and long-term trends were both unfavorable. If we compare and contrast the 2018 chart with the 2008 chart, we can see they really do not have anything in common.
FIVE MONTHS OF POTENTIAL SUPPORT
The expression "what once acted as resistance may now act as support" tells us the S&P 500 has numerous bands inside the orange box where buyers may decide to take action. The green horizontal bars show volume by price, which can help identify areas of stronger potential support.
ONE CHART SUMMARIZES MANY THEMES
This week’s video uses a present-day chart to revisit and recheck several major themes, including:
- Outlook for stocks vs. bonds in the years ahead.
- This will end badly.
- Demographics.
- How markets work in the real world.
- How about small caps?
PROACTIVE INSTEAD OF REACTIVE
As outlined on July 20, we want to make decisions based on the weight of the evidence from multiple timeframes, rather than reacting to red screens and negative signs.