OTM Market Update January 10 2015

Prior Week Market Performance

  • The S&P large cap index lost 0.7% last week to 2044.81.
  • The Russell 2000 small cap index lost 1.1% last week to 1185.68.
  • Long Bonds (TLT) gained 2.9% last week to 131.07.
  • Asset Allocation Model: materially unchanged at  52% Stocks, 27% Bonds, 19% Optional.

 Last Week’s Commentary:  we could have a 4% market drop in next 45 days but it would not alter upward intermediate trend

 This Week’s Commentary: the market is still inside of an ascending channel in the S&P500 as well as within a sideways range in the Russell 2000 (see charts immediately below).  All to the point that it is behaving as might be expected.  Although the long term trend is bullish there is room for a continued slight downward turn in the market over the next month or so and it should not worry longer term investors.

As noted there is still long term strength.  The models for both the S&P500 and Russell 2000 indicate BUY in all periods.  Also importantly the negative divergences in the breadth indicators are gone.  Simply but this means that the 2465 NASDAQ stocks used to create these indicators are acting in concert with the market overall, which usually indicates that the trend is really our friend.

As I’ve noted many times before, asset allocation is the most important consideration here.  Note that your long bond portfolio went up almost 3% last week.  Keep a balance.

01102015 GSPC

01102015 RUT

01102015 pctabove30wma 01102015 advdecline 01102015 wkhighlowdiff

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