Global Macro observations and the period of indecision ends with an upside breakout in stocks

In the last observation, The stock market is in a period of indecision that it will break out of I shared:

Looking at the price trend of the S&P 500 index over the past six months, today’s 1.4% move so far has the trend tapping the upper end of the range. I encluded this chart last Thursday:

asymmetric risk reward return stocks

Here we are a week later, and sure enough, this stock index broke out of the range.

stock market spx spy trend

Of course, past performance doesn’t assure future results, so while this upside breakout is positive, it isn’t without some risks and potential headwinds.

I hedged off some of my market risks, based on pattern recognition hedging the price trend could once again fall back to the lower red line. Of course, my exits on these hedges are predefined, as always, so none of the following global macro observations have any real tactical decision-making authority.

When I enter a position, I predetermine at what price I’ll exit if it becomes a loser or overtime, a laggard.

I’m no economist, so I rarely mention any economic data trends as they don’t lead to actionable tactical signals to buy or sell. However, one of the economy’s strongest segments may be showing signs of weakening: job growth, and it seems important enough to mention. On the global macro front, it seems like the market wasn’t concerned about employment data, and for now, it was right. 

In the big picture from a global macro perspective, the probabilities of a recession are trending higher, earnings growth is lagging, and business and manufacturing sentiment are trending lower. These may be necessary issues the U.S. has to deal with to get through the trade war with China.

On the other hand consumer confidence, spending, and employment have been able to withstand difficult conditions and recover. Up until now, the consumer and employment has been the bright spot. From this point forward, any weaknesss in consumer spending, confidence, and employment is a risk. Momentum in job growth has turned down from a cyclical peak this year, so I’m guessing it’s something that may become an issue eventually. When it comes to global macro data, there’s always something to worry about, so I don’t make my decisions with it.

Today’s employment data was a little better than expected, so it’s a driver of today’s stock market upside breakout. As past performance never guarantees the future, it may be different next time.

Until then, the stock market has indeed broken out of its coil and is sprung up.

 

Mike Shell is the Founder and Chief Investment Officer of Shell Capital Management, LLC, and the portfolio manager of ASYMMETRY® Global Tactical.

Mike Shell and Shell Capital Management, LLC is a registered investment advisor focused on asymmetric risk-reward and absolute return strategies and provides investment advice and portfolio management only to clients with a signed and executed investment management agreement. The observations shared on this website are for general information only and should not be construed as advice to buy or sell any security. Securities reflected are not intended to represent any client holdings or any recommendations made by the firm. Any opinions expressed may change as subsequent conditions change.  Do not make any investment decisions based on such information as it is subject to change. Investing involves risk, including the potential loss of principal an investor must be willing to bear. Past performance is no guarantee of future results. All information and data is deemed reliable, but is not guaranteed and should be independently verified. The presence of this website on the Internet shall in no direct or indirect way raise an implication that Shell Capital Management, LLC is offering to sell or soliciting to sell advisory services to residents of any state in which the firm is not registered as an investment advisor. Use of this website is subject to its terms and conditions.

 

 

 

 

 

 

 

Leave a Reply

Please log in using one of these methods to post your comment:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: