U.S. Stock Market Trending Higher But Momentum Slowing

The major US stock market indexes were little changed in the last week, except for the NASDAQ Composite which was up 1.2%. The S&P 500, the Dow Jones Industrial Average and the NASDAQ have surged off their mid-October lows and have set new all-time highs. The Russell 2000 has not. Year-to-date, the S&P 500 is up 10.36%; the DJIA 6.38% and the Russell 2000 is barely positive at 0.91%. The iShares 20+ Year Treasury Bond (TLT) is up 19.74%. Yes, lower-volatility Treasury bonds continue to out-perform the stock indexes on both a relative and absolute basis.

Those of you that read my weekly commentary are aware that I have not participated in this latest equity surge and that I have most of my clients positioned more heavily in bonds and cash. Frankly, I am not concerned that I missed the most recent low-volume equity ramp because with growth slowing, interest rates falling and most major economies around the world in recession, there is a lower liklihood that we are in the beginning stages of the next great bull market. Instead, I believe there are significant risks of a correction that could happen at any time.

The U.S. stock market trend indicator that I use signaled an uptrend on Wednesday of last week, however the underlying components involved in that indicator continue to weaken. In other words, technically, the trend has changed but caution is warranted. So I remain cautious. Based on the CFTC futures and options contracts the majority of investors are levered long the S&P 500 while being short the US 10-year Treasury bond. That has been a losing position for most of this year and if it starts to go against them again, the stock market will correct and bond yields will go down. So, I’m sticking with bonds.

Trending Indicators

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US Stock Market      Trending Up *

Canadian Stk Mkt    Trending Down

US Bond Yields         Yield’s Trending Down

Lastly, I just returned from the National Security Investment Consultant Institute’s (NSIC) founder’s class. I’m humbled to be 1 of roughly 20 financial advisors nationwide that was asked to attend this prestigious event. The purpose and mission of the NSIC is to train and equip investment advisors about national security issues and so they can further protect their clients. I plan to share more thoughts about some of the real threats facing today’s investors. Thanks for reading.


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Any opinions expressed herein are solely those of the author, and do not in any way represent the views or opinions of any other person or entity.