Current Market Trends

Monday, March 13, 2017

Dear Friends,

First – thank you for all of your kind referrals – we sincerely appreciate it. Thank you for your trust.

Trend is UP

Duh, no kidding – yes the trend is up.

As a trend follower we want to:

  • Ride the trend

  • The trend is your friend

  • Don’t fight the tape

Below is a 20-year monthly chart of the Dow Jones Industrial Average:

  • Look closely at the blue line

  • That’s the 10-month simple moving average of prices – that’s the long-term trend line –the most important trend

  • Notice how over the past 20-years that it has been wise to be invested in stocks when the slope of the blue line is UP and be out of the market or CAUTIOUS when the slope is DOWN

  • Look at the second window below:

  • That’s the slope of the 10-month linear regression line of prices

  • When the slope line is above zero the slope is POSITIVE and when below 0 the slope is NEGATIVE

Both the long-term trendline and the slope of the linear regression line are positive – that means we stay invested

What happens when the slope of these lines is up steeply?

  • Below is a 10-year chart of the Dow Jones Industrial Average (DJIA)

  • Notice the 4 sets of orange lines – those are channel lines of prices – the middle of the 3 lines is the 10-month linear regression line

  • In the 2nd window below is the slope of that linear regression line

  • Notice the 4 red circles – those are the 4 times in the past 10-years where the slope (of the linear regression line) is steeply up

What happened in those 3 prior cases of steeply up slopes (markets rising at a fast pace):

  • The DJIA had a 2 month down correction in summer-2010

  • The DJIA had a 5-month down correction in summer-2011

  • The DJIA had a 1-month down correction in January 2014

What will happen in the current fast rising market?

  • No one knows

  • But, no doubt some kind of correction is likely to occur

  • We have no idea when or if that correction will occur, and if a correction occurs we have no idea of the magnitude of the correction

What should we do as investors?

  • As trend followers, we simply want to follow the trend

  • We do not want to make decisions based on forecasts of what the markets will do

  • Our recommendation – the uptrend is clearly intact, so stay the course

Founded in 1992, Jackson Wealth Management is an independent, fee-only investment advisor. Founder George P. Jackson has been the CEO/CIO of the firm since its inception with the goal of delivering value to his clients and his associates. 

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Jackson Wealth Management, LLC is not affiliated with Triad Advisors, LLC.

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