Full Swing

One of the most positively anticipated earnings seasons in years is in full swing and most of the news has gone according to plan. As earnings seasons go this has been very good Corporate America. Here is the problem. Markets haven’t budged. That in essence shows how the market is a discount mechanism. Great earnings were widely expected and were priced in months ago. Inflation is the new worry and the statistics that we get next week will most likely show inflation rising above the 2% goal of the Federal Reserve. Next week could signal more rate hikes on the way and a higher 10 Yr Treasury. That could prove negative for stocks.

It seems that we are not the only ones signaling caution as we are seeing that in the positioning of public investors/institutions and sentiment numbers. The key takeaway here is that as investors become more cautious in their positioning it makes it more likely that when we break out of our current range the upside will be exaggerated and the downside could be more limited. Conservative positioning will leave us all with more dry powder and buying power as a group. We are not saying which way it will break but we are trying to decipher which way to lean.

We continue to invest for inflation and anticipate stocks will continue to struggle with their current range. We have low duration with our bond portfolio and continue to add commodities to our asset allocation. The commodity sector is one of the best performing asset classes in 2018. Another focus is our cash and generating for the first time in a decade returns there. Not sexy. Just smart. The market continues to struggle and is stuck in the range between 2550-2700 on the S&P 500. The longer it stays in the range the better it is for the bulls and the harder the breakout will be when it comes. We see the market breaking to 2850 and new highs or a trapdoor opening with a swift move to 2400 or lower. The market still struggles with 2666 as we closed the week at 2669. We are stuck, for now, in a range between the 100 Day Moving Average (DMA) and the 200 DMA and that range is growing tighter each week. Something will have to give. Keep an eye on the door. When these ranges break things will change rapidly – but for now we wait.

I think we aspire less to foresee the future and more to be a great contingency planner… you can respond very fast to what’s happening because you thought through all the possibilities, – Lloyd  Blankfein

To learn more about us and Blackthorn Asset Management LLC visit our website at www.BlackthornAsset.com .


A pessimist sees the difficulty in every opportunity; an optimist sees the opportunity in every difficulty. – Winston Churchill

Disclosure: This blog is informational and is not a recommendation to buy or sell anything. If you are thinking about investing consider the risk. Everyone’s financial situation is different. Consult your financial advisor.

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