151 Point Energy-Sapping Move

If we told you the S&P 500 had moved 151 points since August 24, you would probably say, “you are crazy”. The S&P 500 closed at 1998 on August 25. The close on September 11 was just one point lower (1997). While the market has made little progress (up or down) since August 25, those who have been watching it tick-by-tick have gone on a 151 point energy-sapping and stress-inducing roller coaster ride. The table below shows the intraday swings on the S&P 500 dating back to August 25. The total of the intraday ups and downs comes to 151 points.

Focus On Closing Prices

For investors, watching the market tick-by-tick is often an unnecessary exercise. The real information concerning the net outcome between the bulls and bears comes in the form of the closing price. The same concepts apply to a weekly timeframe; the weekly close is often quite different than the stress-inducing swings that take place during the week. Are there exceptions to these rules of thumb? Yes, crisis periods require a bit more monitoring and focus (see 2008).

Focus On Support And Resistance

One way to reduce stress is to say, “I will leave my portfolio alone as long as the market closes above support”. This week is a good example. We have noted reasons to be patient on September 8, September 9, and September 10. As of the close on September 11, the support levels we have been watching remain in play, meaning we have remained in “leave it alone” territory during the recent intraday swings (see chart below).

Investment Implications – The Weight Of The Evidence

The tweet below from Thursday’s trading session sums up the “when a market is in a range” strategy:

The reference to organization above really speaks to the stress-reducing benefits of systems, rules, and structure.

Friday Is A New Day

Retail sales, consumer sentiment, and business inventories are all on deck. For now, we continue to hold U.S. stocks (SPY), a small stake in bonds (TLT), and leading sectors, such as technology (XLK). Even with the intraday rally Thursday, the S&P 500 is still down 10 points this week. If the bears carry the day Friday, our model may call for an incremental reduction to the growth side of our portfolios. As you might guess, we won’t consider anything firmly until the market nears the close.