A Small Speed Bump in the Melt Up

Last week, the S&P500 gave back about 0.5%. Trading volume was on the light side, and volatility did not move higher in any meaningful way–the VIX index remained close to the lows reached earlier this year (August to be precise).

In US economic news, the week was mostly disappointing. Among the misses were the Chicago Fed national activity index, the Dallas Fed manufacturing survey, the Case-Shiller home price index, the FHFA house price index, new home sales, core durable goods orders, 2nd quarter GDP, international trade in goods, pending home sales, the Kansas City Fed manufacturing index, personal income, Chicago PMI and consumer sentiment. Only consumer confidence, the Richmond Fed manufacturing index, and headline durable goods orders beat their respective estimates.

Technical analysis is still showing the same message—the S&P 500’s uptrend has resumed, and last week’s slight decline was only a speed bump in this longer term uptrend. Of course, prices on the index are still overstretched to the upside, but this doesn’t seem to be preventing investors from bidding the index higher. And the mixed economic news also doesn’t seem to be a big problem.

As discussed over the last few weeks, until several critical US economic indicators turn down (these indicators were not impacted by last week’s mixed economic results), then the clearest pathway for the S&P500 is still upward.

Of course our Simple Rule captures this information and is giving us the same message—stay net long the S&P500 index, until further notice.

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