• Market Insight

FLS Playbook Update: Sideways Action Continues… For Now & 3 Bullish Points 09.10.15

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[su_heading style=”modern-2-dark” size=”20″] Market Update [/su_heading]

The market continues to “pause” and “digest” late August’s steep sell-off. So far this is “normal” action after a big move and we have to expect the market to move sideways until the S&P 500 closes above near term resistance (1993) or below near term support (1867). Until then, by definition, we expect this sideways action to continue. Stepping back, the market is weak and the fact that it can’t bounce from deeply oversold levels leads us to believe it wants to move lower from here. Of course, the giant elephant in the room is the Fed. They are scheduled to meet next week (9/17) and hold a press conference which is always fun. We don’t believe they will raise rates but with this Fed, anything is possible.

3 Bullish Points To Keep In Mind:
To be clear, the market is in correction territory and has formed a new downtrend. But if we turn higher (enter any positive headline the market wants to focus on) -we can easily move higher from here. Here is the “bullish” case for stocks to rally: 
1. Fairly Valued: We do want to note that they S&P 500’s P/E ratio is in the mid teens and we haven’t seen a major market top with the P/E below 22 in the past 3 decades. That doesn’t mean we can’t top out below there – just that it hasn’t happened in the last few decades. 

2. Rates Are At Zero: Secondly, rates are at zero- we haven’t seen a big top when rates are at zero anytime in recent history. Again, that doesn’t mean we can’t top out just that it hasn’t happened yet.

3. 8.5% Below A Record High: Even with all the negative headlines and steep selling, the S&P 500 is “only” -8.56% below its record high!  One would think we are down much more.   Just some food for thought in case we decide to rally from here. For us, we need to see the S&P 500 jump above 1993 and then back above 2040, then 2054 before we will turn bullish on the market. As long as we stay below 2040 – by our rules -we are in a new downtrend. 

[su_heading style=”modern-2-dark” size=”20″] FLS Portfolio [/su_heading]

[su_heading style=”modern-1-dark” size=”18″] Positions & Working Orders [/su_heading]

  1. The FLS Portfolio is 100% in cash and there are no new working orders

 

 

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Adam Sarhan

Host Of The #SmartMoneyCircle Podcast, Founder and CEO of 50 Park Investments. Adam provides weekly market updates to ChartYourTrade.com readers. He is a FORBES Contributor and is a frequent guest on all the major financial media outlets.

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