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.

Will the 15th Time Be the Charm?


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Well, here we go again. Once again, the S&P 500 finished at what amounted to a fractional new all-time high on Thursday. And once again, the venerable index did not produce a convincing break above the top end of the trading range that has been with us for quite some time now. So once again, the question of the day is if the breakout will finally arrive or if traders will produce yet another “fake out” at the top end of the range.

If you find your self skeptical about the market’s ability to break on through to the other side, you are likely in good company. You see, this is definitely not the first go-round on this. And while we can argue about the final tally, we count no fewer than 14 prior breakout attempts since the end of February alone. So, please forgive me if the champagne remains in the rack at this stage of the game.

S&P 500 Index – Daily

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The other question investors may be wondering about is why the market suddenly moved back up to new highs. Isn’t there a rate spike occurring? Wasn’t the earnings season a disappointment? Isn’t the economy still producing punk numbers? And isn’t the Fed about to hike rates?

All About Rates?

While there was no clear catalyst for the move, the stabilization in rates was the go-to explanation du jour for the improved mood on Wall Street. At the heart of the move may have been a WSJ article suggesting that the reasons being bandied about for the selloff in bond prices may not be sustainable. For example, the article noted that expectations for the Eurozone economy to improve in any meaningful fashion appear to be misplaced and that while the U.S. economy should improve in the second half of the year, the data remains weak at this point in time. Therefore, the thinking is that the spike in rates may be short-lived.

Will China Join the Game?

Another argument heard from the bull camp was that China is about to enter the stimulus/QE game in a meaningful way. Unless you live in a cave without an internet connection, you are likely aware that the growth rate of China’s economy has been faltering. Some analysts have gone so far as to say that the world’s second biggest economy is in trouble. As such, expectations are building for China to launch stimulus programs that may include the buying of bonds. And in short, every trader on the planet knows what to do when central banks start buying in the open market.

Not as Bad as Feared

While not exactly a timely issue, yet another point on the bull camp’s short list is the fact that the market seems to have survived the latest earnings season none the worse for wear. The key here is that although the bottom line numbers for Q1 were clearly not great, they also weren’t as bad as had been feared. So, again, while the timing can certainly be called into question, there may be some “sigh of relief” buying going on here.

But The Big Question Is…

However, the big question is if the 15th (or 13th, or 14th, or 16th – you make the call) try at a breakout on the charts will be the charm? In sum, this movie has been on a loop for the better part of the last six months and all traders know how it ends. To date, the game plan for the fast-money types has been to hit the market hard with sell orders each and every time a breakout attempt gets underway. So, will Wall Street continue to play the same ‘ol game or has the breakout moment finally arrived? Stay tuned, this could get interesting.

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