Are We Bullish On The S&P500?

Are We Bullish On The S&P500?

interAnalist Market Review

S&P 500 Cash Index closed today at 2818.82 and is trading up about 5.43% for the year from last year’s closing of 267361. Thus far, we have been trading down for the past 2 days, while we have made a low at 2808.34 following the high established Wed. Jul. 25, 2018. We did penetrate the previous session’s low and closed below that low creating an outside reversal to the downside.

From a cyclical perspective, the broader view which provides a map of the future is interesting. Our next yearly target in time for a turning point is 2026. Up until now, the market been consolidating trading within last year’s range. The direction into the next target due 2028 will be indicated whether we close above or below last year’s closing of 2673.61.

The Daily level of this market is currently in a full bullish immediate tone with support at 2808.61.

On the weekly level, the last important high was established the week of July 23rd at 2848.03, which was up 24 weeks from the low made back during the week of February 5th. So far, this week is trading within last week’s range of 2848.03 to 2795.14. Nevertheless, the market is still trading downward more toward support than resistance. A closing beneath last week’s low would be a technical signal for a correction to retest support.

The broader perspective, this current rally into the week of July 23rd reaching 2848.03 has exceeded the previous high of 2791.47 made back during the week of June 11th. Right now, the market is above momentum on our weekly models hinting this is still bullish for now as well as trend, long-term trend, and cyclical strength. Looking at this from a wider perspective, this market has been trading up for the past 16 weeks overall.

Currently, this market remains in an uptrend posture on all our indicators looking at the weekly level. We see here the trend has been moving up for the past 24 weeks. The previous weekly level low was 2532.69, which formed during the week of February 5th, and only a break of 2789.24 on a closing basis would warn of a technical near-term change in trend. The last high on the weekly level was 2848.03, which was created during the week of July 23rd, and has now been exceeded in the recent rally.

Critical support still underlies this market at 2446.54 and a break of that level on a monthly closing basis would warn that a sustainable decline ahead becomes possible. Immediately, the market is trading within last month’s trading range in a neutral position.

Overall on a broader basis, looking at the monthly level, this market is currently in a rising trend. We see here the trend has been moving up for the past 28 months. The previous monthly level low was 1810.10, which formed during February 2016, and only a break of 2594.62 on a closing basis would warn of a technical near-term change in trend. The last high on the monthly level was 2872.87, which was created during January.

 

The Street: BEAR MARKET WARNING!

The Street: BEAR MARKET WARNING!

It isn’t rosy in all Wall Street research departments.

Citigroup analysts are predicting a “full-on bear market” within months based on historical trends, according to a new note by equity strategist Robert Buckland. Here’s how you can protect your portfolio.

Assess Your Risk

Most everyone will suffer some losses in a bear market, but investors can decide now for themselves how much they are willing to risk.

“The first thing to do is check the current risk of the portfolio,” Koury said. “This will help the investor determine what would be the worst case scenario if the market were to go into a bear market. That means an investor will know how much they’re willing to lose and they can determine whether or not that is comfortable for them.”

Investors who don’t plan to make withdrawals from their portfolios for decades could leave their investments be until the next bull market, but investors planning on retiring within 10 years might want to preserve their wealth. Wise advisors like Koury recommend that investors should seek the help of either a financial planner or online services that can help guide them through tough times.

Set Aside What You Need To Live

In addition to limiting their exposure to equities, retirees and other investors living off of their portfolio’s returns also should prioritize their living expenses over investing when the market’s down.

“If you are taking income from your portfolio, always be sure you have a couple year’s worth of withdrawals in money market funds or short-term bonds,” said Edward Snyder, a certified financial planner at Oak Tree Advisors.  “The rest of your portfolio should be diversified among major asset classes, including intermediate-term bonds. This should allow you to ride out a down market without having to sell stock investments while the market is down.”

Participating In A Bear Market Is Optional

“I do not currently believe a large bear market decline is imminent like many do today,” said Livio Nespoli of InterAnalyst, a 30-year financial advisor.

“Having 12 months of savings ready and waiting for you is certainly wise. However, it does not mean that your primary retirement accounts will avoid a 30 – 60% bear market decline. Remember, a 50% decline requires 100% just to get back to even. Thus, you must have a vehicle that can help you avoid the majority of the decline and capture all of the growth until the bear actually arrives on the scene.”

Mentally Prepare Yourself

Your own bad investment decisions can cost your portfolio as much as market losses, certified financial planner Patrick Amey thinks.

“Prepare yourself emotionally to ‘ride it out’ and tune out the noise,” Amey said.

It gets noisy in the midst of bear markets as many remember from 2008. So, have tools that can a help you remain calm, avoid guru opinions, or offer subjective emotional decision making. The price of the tools is inconsequential.

 

6 Facts About The S&P500 Index

6 Facts About The S&P500 Index

In terms of history and novelty, no stock index, including the S&P 500, takes precedence over the Dow Jones Industrial Average. The Dow is the second-oldest stock index in the U.S., trailing only the Dow Transportation Index, and it recently celebrated its 122nd birthday.

But for as revered as the Dow is, it’s also a pretty useless index with regard to tracking the health of the U.S. stock market. It has just 30 components, meaning some industries have little or no representation, and more importantly, it’s a price-weighted index. This means that share price, not market cap, determines how much influence a component has within the index. Thusly, Boeing and its nearly $335 share price has close to 10 times the influence of drugmaker Pfizer, which has a share price of around $37 (yet, incidentally, a larger market cap than Boeing by about $20 billion).

If we want a truly encompassing benchmark to track the health of the U.S. stock market and economy, then the broad-based S&P 500 Index, with its representative 500 companies from a variety of industries and sectors, is our best choice.

Like the Dow, the S&P 500 is rich in history, as well as interesting facts. Here are, in no particular order, seven fascinating facts you may not have known about the S&P 500.

1. Originally, it didn’t contain 500 companies

A little more than 61 years ago, on March 4, 1957, the S&P 500 we know today took shape. Back then, as it is today, the Index was comprised of 500 companies. But the S&P 500 hasn’t always tracked 500 companies. When it was first introduced in 1923, it was simply known as the “Composite Index” and tracked the performance of a relatively small number of companies. This was expanded in 1926 to include 90 stocks, which was the number it stuck with until its expansion to 500 companies in March of 1957.

2. There’s been a lot of turnover, yet many familiar faces remain

As you might have rightly imagined, there’s been quite a lot of turnover in the S&P 500 since March 1957. An S&P Dow Jones Indices committee is responsible for reviewing and replacing companies in the S&P 500 on a regular basis to ensure the Index reflects the dynamic nature of the U.S. economy as closely as possible.

According to a Bloomberg report from March 2007, 50 years after the modern-day S&P 500 came into existence, there were 86 original members still remaining. Though this figure has likely fallen over the past 11 years thanks to mergers, acquisitions, bankruptcies, and removal decisions from the committee, there are still dozens of companies that have been a part of the S&P 500 for more than 61 years and counting. Examples include Coca-ColaMerck, Pfizer, PepsiCo., and Kroger, to name a few.

3. Technically, there are more than 500 stocks included in the S&P 500 right now

Here’s a weird fact to share with your friends at parties: Technically, the S&P 500 tracks more than 500 stocks. Though the index is limited to 500 companies, some companies have issued more than one class of stock, meaning the index tracks two or more of these classes. As of July 2018, the S&P 500 actually tracked 505 stocks.

As an example, in 2014, Google, which is now known as Alphabetissued a new class of stock. The pre-existing Class C shares (GOOG) have no voting rights, while the 2014-issued Class A shares (GOOGL) have one vote per share. Because Alphabet is such a mammoth of a company, its inclusion in the S&P 500 makes sense…but only if both classes of its stock are tracked by the S&P 500.

4. There are stringent criteria for inclusion in the Index

Though the committee has the ultimate say on what companies are included and removed from the S&P 500, there are some pretty clear guidelines for inclusion. The selection criteria include:

  • A market capitalization in excess of $6.1 billion.
  • Annual dollar value traded to float-adjusted market cap is greater than 1.0.
  • A minimum monthly trading volume of 250,000 shares in each of the six months leading up to committee review.
  • Must be a publicly listed company on a major U.S. exchange (no over-the-counter (OTC) stocks).
  • Certain securities are ineligible, such as limited partnership, master-limited partnerships, OTC stocks, preferred stock, royalty trusts, and exchange-traded

5. Its 10 largest components comprise more than 21% of the Index

Even though the S&P 500 doesn’t fall victim to the uselessness of price-weighting, it’s still heavily influenced by a relatively small number of components. As of July 5, 2018, the largest 10 components accounted for more than 21% of the S&P 500’s weighting:

  1. Apple3.924345%
  2. Microsoft3.300070%
  3. Amazon.com2.947227%
  4. Facebook2.049400%
  5. Berkshire Hathaway Class B1.553777%
  6. JPMorgan Chase1.520523%
  7. ExxonMobil1.500398%
  8. Alphabet Class C: 1.469428%
  9. Alphabet Class A: 1.467526%
  10. Johnson & Johnson1.443485%

In other words, like the Nasdaq, technology plays a key role in influencing the Index.

6. The S&P 500 has undergone 36 corrections since 1950

While we often think of the stock market as a wealth creator, it’s worth noting that downtrends and corrections — defined as at least a 10% move lower from a recent high — actually happen quite often. According to data from stock market analytics company Yardeni Research, the S&P 500 has undergone 36 corrections since the beginning of 1950, or about one every two years. Though bear markets are less common — downside in the stock market is inevitable!

Despite being prone to corrections every so often, at no point would an investment in the S&P 500 for a period of 20 years have produced a loss. What’s more, with the exception of the correction that occurred earlier this year, all previous 35 corrections since 1950 have eventually been completely erased by bull market rallies.

In short, the broad-based S&P 500 has demonstrated that patience and proper research pays off over the long run.

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