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.

It’s a Bull Market Until Proven Otherwise


wall street bull

From a long-term perspective, it is worth noting that the current advance in the S&P 500 is now the 2nd longest period in history without a 10% correction and the 3rd longest (but only by a hair) without a 20% correction (aka a bear market). Thus, it is easy to say that this bull market is getting long in the tooth. However, before you run out and sell everything, it is important to remember that bull markets don’t die of old age. No, usually, the bears come to call in response to economic recessions, an inflationary environment, the Fed getting aggressive, and/or an external event such as the Gulf Wars.

So, when looking at the market from a longer-term perspective, it is probably a good idea to pay attention to the big-picture drivers. Running down the list of the market fundamentals, we find that interest rates remain low from an historical perspective, the economy seems to be emerging from yet another weather-induced soft patch (our economic models remain moderately positive at this time) and there is no serious threat of inflation. On the other side of the ledger, we see that earnings are struggling a bit and the technical health of the market’s industry groups remains moderately positive (but only moderately so).

In short, this quick-and-dirty rundown on the bigger picture state of the market would seem to suggest that the edge continues to favor the bulls and that longer-term investors should continue to lean to the long side.

So, what would it take to turn our moderately positive stance more cautious from a big-picture perspective? This list includes a significant backup in rates (think of the 10-year over 2.5%), the threat of lasting inflation, the Fed becoming aggressive (and no, returning rates to more normal levels doesn’t count), the economy heading toward recession, and/or meaningful technical divergences. But for now, since there are no check marks to be made on this list, a buy-the-dip approach appears to be warranted.

Technical Talk

With the S&P 500 sitting just about smack dab in the middle of the current Donchian Channel bands, it can be argued that the market is waiting on some important news. But with the jobs report out of the way and nobody paying much attention to Greece these days, the question, of course, is what exactly are traders waiting on?

To a pure market technician, both the question and the answer are moot as this camp contends that “the tape tells all.” So, from a pure price perspective, things couldn’t be more neutral and the game continues to center around a break of the important support and/or resistance zones.

Speaking of support, we should note that there are three important zones of support between 2040 and 2070. But for us, the key level of support continues to be 2040 as a meaningful break below this point would undoubtedly bring in significant technical selling.


S&P 500 Index – Daily

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