Market Notes

Eagle, Colorado


Major stock indexes are finally breaking out of a months-long sideways trend, to the upside. We’ve been watching closely along the way. In a private note to the team last week on Wednesday after market close I noted that the S&P 500, Dow and Nasdaq were all breaking out to the upside.

Here is the S&P 500 chart from the note:

This is what we like to see – confirmation. If the RSI highs were connected with a line, you’s see that breaking out as well.

With this evidence we are a little less cautious about our bullishness in the medium-term (18 or so months).

It is not at all out of the ordinary to see prices come back to test the line on the chart that was once resistance. In fact, it is to be expected. We all know that markets don’t move in straight lines – especially to the upside. Even with this technical breakout we could see markets trade sideways for a while for any number of reasons. And while there are a lot of reasons to be optimistic today, the biggest risks are the ones we don’t (and can’t) see coming. To be clear, we aren't out of the woods just yet - perhaps we never really are - but these charts are encouraging. 

Changing gears, another interesting thing we have noticed in the past couple of months is that cash (and CD’s) are actually trading with yields that make sense to start including in portfolios rather than holding simple "cash" and earning very close to 0% for it. While short-term bond yields have ticked up, money markets seem slow to follow – perhaps they are trying to make up for the past several years of losing money on those funds.

In other fixed income news, we are currently evaluating individual bonds of some highly rated companies with strong balance sheets and strong income statements, for inclusion in our core portfolios. If we decide to proceed, the bonds will be purchased using proceeds from existing bond ETF positions.

Have a great week!

PS – Here is an updated look at the S&P 500 chart:

Shane Fleury, CIO

Elevate Capital Advisors 

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