First negative week in a while and I didn’t like it. Brightside is the International index helped counter balance the big drop in the Small Cap. Let’s take a look at the charts and see if the daily charts are starting to give us a warning that things are turning down.
The S&P 500 did have a negative week but the over all look is a healthy uptrend. You have to remember that companies and people invest in stocks to make money. When a profit grows large, someone or something is going to start to take profits. It’s how much of a profit they take that affects the overall market. So when a individual decides to take a full profit and close a position, it has no affect on the market. But when Warren Buffett is closing a position, we all might feel it. Looking at the chart above, volatility has fallen to even lower levels. DMI has softened, but is still positive. There are no warnings here, so we watch and ride the waves.
The Small Cap took it on the chin this week with a 1.68% loss. That hurts just a little but once again the overall trend is good. My CBL that I move up as prices moves up has fired a sell warning and we must be aware of it. The CBL and 50 day ma are almost in the same location, so a 2nd sell warning could be on us quickly. There is a long term trend that is marked on the monthly chart that is well below the current levels and not shown here. I did put on this chart, an intermediate up trend line that I took off the weekly chart to show you. As you can see, we are still well above that or those levels. The DMI has turned negative and could be an indicator that things could be rolling over. If you look back at the current price grind the Small Cap had from December 8th through February 8th, it shows a level of $1155 that is support. If price falls below this point, I would be concerned that a trend change is in full effect.
The International was in the same funk for the last 6 to 7 trading days, but Friday snapped back. That snap back put price back on short trend. DMI is still positive. I think the big drop in volatility stands out the most here and can only be looked at as a positive. The International actually had a positive week which in turn helped save me from having a really bad week. Without the gain in the International, I would have had a 1.04% loss instead of a .58% loss. Everything looks good here for more gains.
Bonds once again reached and tested recent lows. This base near $107 is likely the bottom, but it could stay here for a very long time. There are not many signs of life here except that volatility is falling. The DMI is ugly and spreading to higher levels of negative. It will be interesting to look back in a year of two to see if this is the true bottom. I will steer clear of bonds for now.
Conclusion: We had a negative week. Part of a healthy mark is that it does not go straight up and it acts like a stair case in that it will climb uphill in steps. So I believe this is just a pause with profit taking and soon the climb will start again. Nothing is showing short term that the trend is changing. I will ride it out.
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