Don’t Ignore this Market!

November 18, 2019  |  Michael Reilly

Markets continue to climb to new all time highs. 

You can give me all the reasons you want to be fearful… I’ve read all the headlines too: China trade, Inverted yield curves, a possible recession, impeachment worries, implications of the 2020 election. Blah blah blah…

The fact is, buyers are in control of this market. And the path of least resistance is up.

And what do we know about new all-time highs? They’re not characteristic of downtrends. And new highs historically precede even higher highs.

Both the DOW and the S&P 500 index have finally digested previous levels of resistance – just as they did after the 2014-2016 consolidation.

Just look what happened after the markets finally moved above those previous levels of resistance – it lead to the next bull run in stocks.

(Click any image to enlarge)

Take a lLook at the chart below – it’s a P&F chart of the iShares S&P 600 Small Cap ETF – IJR.

Chart courtesy of NASDAQ/Dorsey Wright

To the far right – the column of X’s exceeds the previous column of X’s, indicating demand for small caps returns and forms a triple top break-out at 82. 

So, in terms of participation, the soldiers are rejoining the generals back on the battlefield.

Small caps are finally looking like an attractive way to invest in U.S. equity markets again, allowing investors a way to diversify away from what has been primarily a large-cap dominant trade.

So, what do we know right now? 

We have new all-time highs for large-cap indices and signs of an improving mid and small-cap market – which is clearly a positive development for investors with exposure to U.S. stocks. 

Today, we remain bullish on the stock market because the “weight of the evidence” continues to point to higher stock prices.

We’re seeing it in the U.S. and we’re seeing it across the globe. Just look at the S&P Global 100 Index breaking out after 5 failed attempts at these levels.

When things keep adding up, pointing towards much higher stock prices, it’s hard to ignore it, and it’s even harder to bet against it.

Sure, we can agree that technical analysis doesn’t give us all the answers. Nothing does. There’s no holy grail. But at the end of the day, regardless of your process, it ultimately comes back to price. 

Successful investing usually comes down to paying attention to the direction of stock prices and adjusting your market stance accordingly. 

ADAPT to what is in front of you.

If you don’t want to do the work yourself, you may want to consider taking a look at one of the investment models we offer here at Rowe Wealth.

We use both technical analysis and relative strength investment techniques in order to design and balance our models so that they contain stocks perfectly matched to meet your investment goals and your own personal level of risk tolerance.

Completely free portfolio and risk evaluations are available to investors with portfolios valued at least $500,000.

Call us today at 866.711.2836 Ext 3 to schedule an appointment.








Post editorial note:

I had planned on ending today’s article there – and that would have been enough. 

But before I sign off for the day, I know some of you out there are shaking your heads – concerned about whether or not this market is overbought. 

So, I guess I should say a little something on the matter.

On a technical basis, I’d agree, it is overbought. I wont get into all the technical indicators that support that statement (think RSI), but it is overbought. 

However, “overbought” doesn’t mean “over”. 

Remember – markets can stay overbought for a long time. 

It’s up to you to decide how you will ADAPT to what opportunities the market is potentially providing – until that opportunity no longer exists.

Until next time, invest wisely..

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