Trade War Fears - Media Overdone - As Usual

Friday, April 20, 2018

Dear Friends,

Markets have made a nice recovery from the plunge in late January – early February, on fears of trade wars.

As usual, the media over-hyped trade wars as the beginning of the end of the world economy. That hype panicked many investors. Of course, as usual, the media hype did not play out as they had projected.

The large cap US stock market uptrend remains intact. Accordingly, stay invested in stocks.

Let’s look at the S&P 500 index daily chart for the trailing 1 year:

  • The green lines show areas of support. You can see a double bottom chart pattern – that’s good news.

  • The orange line shows the VIX volatility index which had been very low, spike up at the beginning of February, but the trend is clearly down – more good news.

  • The blue circle to the right shows that in the short-term the market is overbought, which would make me cautious in adding moneys now to stocks, however look at the blue ellipse – markets can stay overbought for months as they continue to move higher.

  • The light blue line is the 200-day simple moving average. That’s the long-term trend line. It is both sloping upwards and the market is trading above the trend line – signs that the stock market continues to be in an uptrend.

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