David Moenning

About the Author David Moenning

David Moenning is a the Chief Investment Officer at Heritage Capital, which focuses on active risk management of the U.S. stock market. Dave is also the proprietor of StateoftheMarkets.com, which provides free and subscription-based portfolio services. Dave began his investment career in 1980 and has been an independent money manager since 1987. Thus, Dave has been live on the firing line and investing for a living for more than 25 years.

The Flip-Flop Environment Continues

This week’s Fed-induced joyride to the upside certainly made investors feel better about the state of the current stock market environment. However, the simple fact remains that it has now been more than a month since the S&P 500 (INDEXSP:.INX) has been able to put together two consecutive daily advances. And it is also worth noting that the return of the venerable blue chip index remains negative for the month of March. The good news is that the intermediate-term trend remains up and our market environment models have all moved back up into the positive zone. And while the models have flip-flopped a fair amount over the last four months, history tells us that we should favor the bulls when the indicators are positive.

Technical Take

The back-and-forth environment continues as the computers appear to have a severe case of A.D.D. these days. For those of you keeping score at home, the S&P 500 has now changed direction 10 times since the beginning of December and 7 times already this year. To be sure, this trendless environment makes it tough on traders. However, if one steps back a bit, it becomes clear that (1) there is an intermediate-term uptrend intact and (2) the manic/depressive action appears to be a period of consolidation. This becomes clearer when one looks at a weekly chart of the indices. And given that the market has a tendency to exit a consolidation phase heading in the same direction it was when the consolidation began, the bulls can take solace in the fact that, according to the textbooks, stocks should resume their long-term uptrend – eventually.

S&P 500 Index – Daily


Turning to This Morning

While the majority of the attention on trading desks remains on what the Fed is going to do next and when, this morning China and Greece are also back in the headlines. On the Fed front, there is really nothing new to report as the general consensus is that the rate liftoff will begin in September. Across the pond, today’s focus is on Greek PM Alexis Tsipras, who emerged from talks with EU creditors in Brussels reportedly feeling optimistic. Recall that the Greek government is expected to present a full list of specific reforms in the next few days. However, it is important to remember that “Grexit” concerns are still lingering. In China, the Shanghai Composite was up another 1% overnight – bringing the weekly gain to more than 7% – as the index has now been higher for 8 straight trading days. The impetus behind the rally continues to be expectations for “policy support” (which is analyst-speak for rate cuts and/or stimulative spending). The most recent economic headlines show concern about the beleaguered property sector with some in the press calling for more efforts to ease the situation. Here at home, futures are pointing to an up open on Wall Street, which could produce yet another reversal day for stocks as the S&P has now flip-flopped from red to green each day for the past 6 sessions. But some green on the screen is always a good way to end the week.


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