State of the Market: Stocks Hold Their Ground

Focus: STRATEGIES

Marvin Appel Image Marvin Appel President, Signalert Asset Management LLC

Marvin Appel, MD, PhD, asserts that this should be a good year to increase exposure to international equities. He is president of Signalert Asset Management LLC, and an expert in timing models.

State of the Market: The S&P 500 Index is retesting its March 27 lows after staying in an unusually narrow range over the past three weeks. Our equity models remain overall neutral-positive for the intermediate term, which means that risk remains well-contained. However, if the market continues to move sideways or to weaken, our models will downgrade from neutral-positive to neutral at the beginning of May, which would be a signal to reduce equity exposure. For now, I expect stocks to hold their ground.

chart 1

The chart of SPDR S&P 500 ETF (SPY) shows that it has been below the middle Bollinger band (20-day moving average) for almost four weeks. This is the weakest that SPY has been since before the election and signals a change in the near-term trend from up to sideways at best.

For the past three weeks, MACD has been scraping the zero line—very unusual. Overall, the sideways to lower price action and MACD do not give much clue as to which way stocks will break out. Fortunately, market breadth is positive, with the advance-decline line making new highs. The most likely scenario is for SPY to stay near or above the $233.60 support area for the next three weeks or so, although a small temporary penetration to a new low is possible.

chart 2

It is not only US equities that have lost their momentum.

 
Clicky