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We show two long-term monthly charts for the benefit of investors (as opposed to traders). The first one is of the S&P 500 index, the world’s main stock market index. Its chart shows what level it would need to break to move back into a bear market. We also show an interesting chart comparing how investing in JSE industrial stocks will have performed as opposed to investing in JSE financial stocks over the long term. The result may surprise you.
S&P 500 – BULL MARKET INTACT
Trend: Up.
Strategy: Hold.
* The S&P 500 is still in a primary bull trend (off its 2009 low). It will remain so as long as the price stays above a support zone at 2 (1 220 to 1 190). The sell-off over recent weeks hasn’t changed the big picture (certainly not yet).
* However, a big warning here is a large negative divergence on the stochastic oscillator (on top), which will eventually lead to a very large correction. But that can continue for longer and isn’t a sign to exit just yet.
* A close below the line 2 support zone (1 190) will be a signal to exit US stocks (ie, two consecutive weekly closes, or a monthly close below 1 190).
* But currently US stocks are still a hold for investors. In fact, there’s a reasonable chance the index will move up again – closer to line 1 – to retest its 2007 high (1 576) before a much larger correction occurs.
INDI VS FINI – INDUSTRIALS LEAD
Trend: Indi 25 significantly outperforming Fini 15.
Strategy: 70:30 weighting in favour of industrials.
* The chart above is a ratio of the Indi 25 index divided by the Fini 15 index. This long-term chart clearly shows how the Indi 25 has significantly outperformed financial stocks (Fini15) on a relative basis since 2003 – as seen by a rising ratio line. Interestingly, that outperformance has literally been by more than 10x (ie, 1 000%).
* Currently, there’s a negative divergence on the RSI of the ratio (on top), but that can continue for some time. Either way, the RSI is showing there will be a correction/consolidation in that ratio (most likely temporarily). But long term you can’t bet against large cap industrial stocks (relative to financial stocks).
* Therefore favour Indi over Fini stocks in a 70:30 ratio. After a correction in that ratio, look to increase that to 75:25 or even 80:20 in favour of the Indi.
* Note: The SatrixInd and SatrixFin can also be used as a vehicle to capitalise on the above strategy.
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.
S&P 500 – BULL MARKET INTACT
Trend: Up.
Strategy: Hold.
* The S&P 500 is still in a primary bull trend (off its 2009 low). It will remain so as long as the price stays above a support zone at 2 (1 220 to 1 190). The sell-off over recent weeks hasn’t changed the big picture (certainly not yet).
* However, a big warning here is a large negative divergence on the stochastic oscillator (on top), which will eventually lead to a very large correction. But that can continue for longer and isn’t a sign to exit just yet.
* A close below the line 2 support zone (1 190) will be a signal to exit US stocks (ie, two consecutive weekly closes, or a monthly close below 1 190).
* But currently US stocks are still a hold for investors. In fact, there’s a reasonable chance the index will move up again – closer to line 1 – to retest its 2007 high (1 576) before a much larger correction occurs.
INDI VS FINI – INDUSTRIALS LEAD
Trend: Indi 25 significantly outperforming Fini 15.
Strategy: 70:30 weighting in favour of industrials.
* The chart above is a ratio of the Indi 25 index divided by the Fini 15 index. This long-term chart clearly shows how the Indi 25 has significantly outperformed financial stocks (Fini15) on a relative basis since 2003 – as seen by a rising ratio line. Interestingly, that outperformance has literally been by more than 10x (ie, 1 000%).
* Currently, there’s a negative divergence on the RSI of the ratio (on top), but that can continue for some time. Either way, the RSI is showing there will be a correction/consolidation in that ratio (most likely temporarily). But long term you can’t bet against large cap industrial stocks (relative to financial stocks).
* Therefore favour Indi over Fini stocks in a 70:30 ratio. After a correction in that ratio, look to increase that to 75:25 or even 80:20 in favour of the Indi.
* Note: The SatrixInd and SatrixFin can also be used as a vehicle to capitalise on the above strategy.
Please note: For more recommendations and charts by the author on shares, stock indices and commodities please go to www.themarket.co.za.
