As we highlighted in The Week In Review, the S&P 500 and Dow Jones Industrial Average have suffered weekly losses in the past two and three-week respectively. As a result, we thought you would find it beneficial to take a look at some of our indicators to see what they are telling us.
Let’s take a look…
First we want to view an indicator that we call our “Hi/Lo Risk Gauge.” This chart helps us identify the companies that are establishing new highs in relationship to companies setting new lows. This ratio helps identify potential turning points in the market. We often say we want to invest when conditions are favorable and be conservative when they are not favorable. This is one of the indicators we utilize to identify market trends.
When reviewing this chart, we are registering a positive score of 3.8. This is firmly in the bullish camp. However, if that indicator were to record a -5 or lower, it will raise a warning flag.
Since we do not see warning flags from our indicators, we believe the current indecisiveness in the market is simply noise associated with the normal ebbs and flows of the stock market. It also allows us to focus our research on new opportunities until the data tells us to get defensive.
Knowing that the recent price decline could prove to be a buying opportunity we want to review our “Buy on the Dips” indicator. This chart helps us identify potentially favorable buying opportunities within a prevailing uptrend market like we are currently in.
As the chart notation explains, the current “Buy on the Dips Indicator” has a reading of 42. This is just two points above our rally zone. With this said, if you see back in March, April and May the indicator line got close but never broke into the buy zone, but it still proved to be a favorable buying opportunity for investors.
It is important to note that no indicator is without flaw. We use these market indicators and many others to help improve our odds of a favorable outcome when making an investment.
This is the reason we always say, if and when the facts change – so shall we.