Market Direction Is Important –
Updated Chart of the S&P 500 and Secondary Signals
Of our Four secondary indicators under our MTI:
Relative Strength Index (RSI)-Positive
Chaikin Money Flow (CMF)-Positive
MACD-Negative
Money Flow Index-MFI-Positive
Here are some Simple SELL signals to Watch and Adopt in an Investment Strategy
“We do this for our clients at RWM”
Recession chances may be heightened and it may be time to Sell or reduce risk assets. Here are some economic items we watch:
1. Fast rising inflation, above the average 3%:
Spiraling prices reduce consumer buying power, which accounts for some 70% of U.S. economic activity. Inflation also whittles the value of financial assets.
2. Fast Rising interest rates:
Inflation is a serious threat to bull markets, but the cure can also be toxic when the Federal Reserve Board fights back with stingier monetary policies and higher interest rates. Rising rates pull money from stocks into fixed-income investments.
3. Overvaluation in Equity Markets:
Markets can stay even ridiculously overvalued relative to the usual measures of corporate earnings, sales or cash flow for a long time. The 1990s dot-com craze is a spectacular example. In 1999, the technology-heavy Nasdaq Composite index traded at 178 times estimated earnings—and plenty of stocks didn’t even have earnings – then ended with a 79% decline in the Nasdaq and a 49% in the broader S&P 500.
4. Slowing and Negative GDP Growth for two consecutive quarters
5. EPS Estimate: bullish when the S&P 500 current year EPS estimate is above, or equal to, its value three months ago.
6. Unemployment is bullish when the U.S. unemployment rate is below, or equal to, its value three months ago.
7. Our “Long-Term Market Trend Indicator (MTI)” is bullish when the 35-day EMA of SPY is above, or equal to, its 200-day EMA. Else, it is bearish.