WEEKLY MARKET UPDATE

The long term trend remains up and for the third consecutive week there was a higher close.  More importantly the price range of last week was very bullish.  The market is only a couple of points away from the all time high in SPY made in May.  Last week I opined that it was likely that we may see the market bounce around for a while between the upper and lower green lines. That opinion has not changed.  Let's see what happens over the next week or two.

WHAT ABOUT THE FUNDAMENTALS?

On occasion I am asked if my analysis is heavily dependent on news or fundamental data.  The short answer is no.  Believe me I have charted a lot of fundamental data series against charts of the SPY and the only two things I have found useful is the Federal Funds Rate and the yield for 1 year treasury notes.  As you may or may not know the stock market is very sensitive to the actions of the federal reserve, particularly as it relates to interest rates.  In simplest terms if the Fed is raising interest rates during a rising stock market, eventually yields on other investments (like treasury notes) start becoming more attractive.  On the other hand when the Fed starts lowering rates during a falling stock market, this eventually translates to lower yields on other investments and investors start looking back to the stock market.  Take a look at a monthly SPY chart below.  In the top pane is the SPY, in the next pane I've charted the Federal Funds Rate and in the bottom pane the 1 year Treasury Note Yield.  Now take a look at the blue lines drawn on both as you compare to the price of the SPY.  You should note that it wasn't too long after both series rose above 5% that the bear markets of 2001 and 2008 began.  Conversely, the stock market bottomed in late 2002 and in 2009 not long after both series declined below 2%.

CONCLUSION

I have some ideas for future posts but I would really like to get some feedback from my readers.  If you have anything you would like to see I am interested.  I hope you all have a great weekend.