Old vs New

We said that a dull week was power to the bulls. We were right and the S&P 500 has reached a new closing high. The internals of the market seem to be diverging a bit from the positive path that the averages are on. The market seems to be a bifurcated one where big name tech stocks are driving the averages higher and old line economic ones are falling. Last week we saw UPS, Intel and 3M all have the worst days since 2008 or even as far back as 1987 in 3M’s case. Those are old line economic indicators that we have used for decades to gather information to ascertain the next move in the economy and the market. Strangely enough, the US 10 Year Treasury had a good week as well with rates declining to 2.5%. Not a new low but things are trending in that direction. What does all of this mean? The global economy seems to be slowing and bonds are reacting to that but equity investors are partying on. The market averages are being driven by ever smaller numbers in their leadership. It feels a bit like 1999 complete with big name tech stock IPO’s.

Slack is the latest to announce that they are going public. They have decided to do a direct listing rather than a traditional IPO. What does that mean? It means that Slack insiders will be able to sell their stock in 60 days rather than the traditional 180 days. The unicorns that have been private companies for so long are now rushing to the market and sucking up capital.

We warned of a melt up and here we are. The volume is drying up on the rally and professional investors, while upset about missing out; don’t seem to be in any rush to get back into markets. Assets are rising due to pure momentum. The computers are in charge.

The market is approaching all time highs but with less exuberance than one would expect. 2019 has been a spectacular year so far so we don’t expect investors to press their bets. It might be better to let things play out on the economic and trade front while the market digests these big gains. The 200 DMA on the S&P 500 is at about 2766. That will be the first major line of support should stocks falter. There are lots of investors missing out on this rally so we expect any sell off to be met with buyers.

 

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 .

 

lighthouse

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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