Rallies versus trading ranges
Current market risks investors confusing the two. Here's how to figure it out.
The ROAR Score stays at 10 this week. My 2-ETF portfolio stands at 10% SPY, 90% BIL.
I continue to see the broad stock market as being in a trading range, until new all-time highs are established for the major indexes (SPY in particular)
The trading range is a great time to sit back, watch what happens, with the idea that increasing “offense” (as I’d like to do, but not until recent gyrations resolve themselves) could be done with much more clarity in the coming days/weeks than right this second.
One reason for my reluctant approach to raising the ROAR Score from its puny 10 level is that, like hurricane season here in South Florida, while I see some daylight/upside on daily chart views, the weeklies don’t look so happy.
Relatedly, interest rates are hinting at creeping back down. I suspect that if this picks up steam, it will be due to concerns about recession, which in turn causes a flight to “safety” in US Treasuries. In other words, the Fed could eventually cut rates, but for reasons the stock market won’t like at all. Yet in that environment, as in the year 2000, higher-yielding stocks could do OK, especially relative to the high-growth market leaders.
This is just something my chart work is hinting at. But where I’m really seeing it is in the YARP (Yield At a Reasonable Price) stock portfolio I run over at www.SungardenInvestment.com. That’s a portfolio of dividend stocks, and their charts look a lot better than the trading range bound growth stocks do currently. One of the ETFs in our ETFYourself.com premium 7-ETF portfolio is invested in those types of yield stocks, and it too is performing and looking like better reward/risk tradeoff to me. That is, unless we surge to new, sustainable highs in SPY. To be continued.
This is a trading range
SPY is up the past 3 months, but until it makes a new high and doesn’t immediately fall back down (as in March/April), this is about a 5% range, suitable for “waffling” price action back and forth. My apologies if that made anyone hungry for waffles :-)
This is a rally
As Joe Pesci famously said in the movie “My Cousin Vinny,” this is a story of more than “these 2 Utes (utilities).” Across the sector, I see encouraging charts. The YARP stock portfolio is more over-weighted in Utes than any other sector right now.
How long does this last? Who knows? But one thing is clear to me: this sector currently looks better than most sectors and stocks I see. And a more than 14% move since February (plus dividends, since this is just the price chart) says “rally” not trading range.
