What happened last week.
What we're watching for next week.
The market has taken a hit lately. Should we be worried? A look at the data might help.
Chart of the Week - The China Trade War Standoff Market
In just one week the market has given up all of its gains, and them some, for the last month. As I've asked before, how many times do you want to keep earning the same dollar on your investments?
Chart 2. S&P periodic returns.
The market is losing a little steam. No call to action yet but pay attention. All I'm suggesting is that you look at it and get your house in order.
The numbers are still very positive, but now they're slipping just a little bit. No cause for alarm at this point but certainly cause for revisiting your Plan B.
Chart 3. Percent of stocks above their 50 day moving average
The above chart shows a continuing breakdown in momentum. This is an early warning sign and not a sell signal. But it's troubling.
Chart 4. The Red Zone
In football the red zone is the 20 yard line. Coaches adapt their strategy when their team enters the red zone. Defenses stiffen and offenses become more aggressive. In the stock market the red zone is 5% above the year-ago price.
History shows that once we penetrate the red zone its very likely that we will drop 10% or more through the bottom of the zone. Don't say I didn't warn you.
Final Thoughts
The market is caught between a rock and a hard place. Optimists are counting on a grand resolution to the China trade negotiations. The pessimists are counting on the arrival of a new global recession.
As always, I'm agnostic about the politics at play. I'm a numbers guy and my numbers are calling for caution but not Armageddon. Just make sure you have an exit strategy in place before this magnificent bull market finally rolls over.
If you want more info about how to set up a solid Plan B, send me a message at info@zeninvestor.org
For a full analysis of the probability of a bear market or a new recession, see my Monthly Intelligence Report.
As always, if you like what you see, or have suggestions for improving this recap, leave a comment below, or email me at info@zeninvestor.org