Let’s Continue to Give Bulls Benefit of Doubt

September 24, 2019|1:33pm


Greetings from the northern reaches of Yellowstone National Park. Although we’ve lived in “the west” for nearly 20 years now, my wife informed me earlier this year that we had never been to the nation’s first national park. “Let’s go this fall!” I replied. Of course this was before the trip to England and Scotland made it onto the calendar as well as the recent quick trips to St. Louis, Chicago, and LA. So, while I have indeed been on the road a fair amount recently, I have been completely blown away by Yellowstone. And although I may be the last adult on the planet to discover the wonders of this place, I am glad we finally made it. However, I would like to see the internet service in the park move out of the dark ages!

Sketchy internet aside, it’s the start of a new week and that means that regardless of how long it takes to download the files, it’s time to review the readings of my favorite market models.

Have a great week!

Weekly Market Model Review

Each week we do a disciplined, deep dive into our key market indicators and models. The overall goal of this exercise is to (a) remove emotion from the investment process, (b) stay “in tune” with the primary market cycles, and (c) remain cognizant of the risk/reward environment.

In this process, we analyze our big-picture market models, the market’s current trend and momentum, the potential for a trend reversal, and the fundamental factors such as monetary conditions, inflation, earnings, the economy, and market valuation. So, without further ado, please join us in this week’s review of the “state of the market.”

The Major Market Models

We start with six of our favorite long-term market models. These models are designed to help determine the “state” of the overall market. Put another way, these models indicate which team is in control of the primary trend.

There was one change to the Primary Cycle board this week as the Global Risk Model moved up into the low end of the positive zone. So, with all the indicators now sporting green signals, this continues to be a bull market until proven otherwise and I believe a “buy the dip” strategy is the best way to play the game.

This week’s mean percentage score of my 6 favorite models improved to 84.7% from 73.9% last week while the median also rose to 86.7% versus 75% last week.

The State of the Fundamental Backdrop

Next, we review the market’s fundamental factors in the areas of interest rates, the economy, inflation, and valuations.

There were no changes to the Fundamental Factors board this week and my take on the message here hasn’t changed – despite all the hand wringing and teeth gnashing over the headlines, my take is we need to give the bulls the edge.

The State of the Trend

Next, we review the state of the current trend. This board of indicators is designed to tell us about the overall health of the current market trends.

From my seat, it appears that the bulls took a break last week. While the trend board is no longer completely green, there isn’t a whole lot to worry about at this stage either. IMO, a break below 2930 would suggest the uptrend may be at risk and a move below 2820 would indicate the bears might be in business.

The State of Internal Momentum

Next, we analyze the “oomph” behind the current trend via our group of market momentum indicators/models.

While the momentum board remains positive overall, it does not suggest that there is any real “oomph” behind the current move. Therefore, we may be in for more of the same, back-and-forth type action.

Early Warning Signals

Once we have identified the current environment, the state of the trend, and the degree of momentum behind the move, we review the potential for a counter-trend move to begin. This batch of indicators is designed to suggest when the table is set for the trend to “go the other way.”

Last week I opined that if a gun was placed to my head and I was forced to make a call, I’d say bears had a slight edge. I’ll say the same thing again this week. But I’ll also emphasize that I do not see a table-pounding message from this board at this time. Therefore, I’m of the mind that the sloppy action has a good chance of continuing. Joy.

Thought For The Day:

If your only goal is to become rich, you will never achieve it. – John D. Rockefeller

All the best,
David D. Moenning
Investment Strategist

David D. Moenning


At the time of publication, Mr. Moenning and/or Redwood Wealth Management, LLC held long positions in the following securities mentioned: None

Note that positions may change at any time.

NOT INVESTMENT ADVICE. The opinions and forecasts expressed herein are those of Mr. David Moenning and Redwood Wealth and may not actually come to pass. The opinions and viewpoints regarding the future of the markets should not be construed as investment recommendations. The analysis and information in this report is for informational purposes only. No part of the material presented in this report is intended as an investment recommendation or investment advice. Neither the information nor any opinion expressed constitutes a solicitation to purchase or sell securities or any investment program.

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The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.

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