For August 11 through 15

This week the guardrails are likely to be 1955 and 1900.  If the S&P500 is able to move through either of these levels it would signal a further extension of trend.  1955 is the 50-day moving average.  1900 is the big fat round number that we flirted with on August 7th.

Geopolitics are the name of the game right now.  They’re much tougher to figure out when it comes to market reactions.  Yields on the 10-year continue to suggest that inflation isn’t an issue.  If so, markets could have more up-side simply because the Fed doesn’t have to take their foot off the gas as quickly.  Still, when countries start lobbing bullets back and forth, things get dicey.

I’ve heard a few doom-and-gloom analysts suggesting the markets are going to collapse and head for generational lows.  I understand where they’re coming from.  I can’t say I’m on board with the interpretation of the technicals though.  Extrapolating 30-75 year trends in a market that looks in no way like it did 30-to-75 years ago may be a bit of a stretch.  I may peel some more layers back on this one when I get back from vacation (I saw you roll your eyes… what kind of vacation am I having where I’m still blogging and watching this stuff?)  Bottom line:  trying to call this market as ‘the end’ or ‘the beginning’ is guessing at this point.  A week or two of pull-back after two years of lower-volatility bull markets is NOT abnormal.  It is also NOT necessarily a guarantee that things are going to hell in a hand basket.

I’m not saying there is no downside here.  I’m saying we need to remain rational and we should stick to our processes.  The emotion and sales propaganda at inflection points can get you in trouble when you let your heart take over for your brain.  Discipline is still the name of the game.

Have a great week.  And aloha!

Weeklies 8-11-14

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