Momentum Stalls

Current position for Active portion of portfolio: SELL – S.T.A.Y. Plus™

​New SELL Signal, equities move to inverse.
For the last three months, the rally coming out of the April downturn as seen in the chart below, price has been moving up and momentum moving sideways or down. The green & white lines are short-term & long-term moving averages respectively (see the MACD below). When they become more parallel, the market momentum is waning- even though the market may still be moving up. We like to use an aviation analogy because this situation is like an airplane that is climbing but the air speed is declining. Unless a lot of power is added, the plane will surely change it's trajectory in the downward direction. That is why this market condition always leads toward either a massive increase in momentum (adding power) or a decrease in price (downward trajectory).  With these and other technical indicator conditions developing, it only took a few down days to trigger our SELL signal.  This and several other technical indicators led to a confirmation of the SELL signal. The market, for the most part, has been in a healthy uptrend, maintaining price well above the 20-day moving average, but when the 20-day moving average was broken, it indicated that the current short-term trend is in flux.  The market may consolidate for a period of time and then resume the up-trend, or it may find its way further down towards the 50 day moving average.  Time will tell.  In the meantime, we will remain in the inverse position with equities until the new trend is determined.

For those self-managing their 401k off of this signal, we recommend moving to a "cash" or money-market position.

​Weekly S&P 500 Chart (with all-time hi shown)

​Monthly S&P 500 Chart (with all-time hi shown)