The following True Vine Letter is an excerpt from a recent Premium Edition Letter.
Some Revealing Charts
It occurred to me on a walk last night that drawing the weekly trend lines on logarithmic scale charts and then switching the charts to monthly with the weekly trend lines remaining is a way to determine when the long-term trend may be at a key inflection point. Here is what this looks like for the S&P 500 Index:
You can see here that the monthly price is still within the weekly bull channel that goes back to October 2012. In other words, the long-term bullish trend is still intact.
It is worth noting that following this method—raising cash when the monthly price nears the top of the weekly channel and deploying cash when the monthly price nears the bottom of the weekly channel—would have helped you reduce exposure right before the last 2 stock market peaks in January 2018 and July 2018.
Here is the same type of chart for the State Street SPDR Portfolio Developed World Ex-US ETF (SPDW):
You can see from this chart that this relationship is even more pronounced for these large capitalization, developed country stocks listed outside the United States.
Another factor at play here is the US dollar. The SPDW turned higher in January 2016, right as the dollar started falling, and has been plummeting in 2018 as the dollar has been climbing.
In the context of decent global economic growth, these 2 charts tell me that (1) stocks are getting ready to put in a bottom and (2 )non-US developed market stocks could outperform the S&P 500 in 2019 if I am correct that the US dollar is peaking and getting ready to roll over.
Regarding the US dollar rolling over, consider the following monthly price chart of the WisdomTree Bloomberg US Dollar Bullish Fund ETF (USDU) annotated with the weekly price trend line channels:
USDU keeps putting in lower highs and lower lows on the monthly price chart.
Important Buying Opportunity
I expect that stocks have just or will soon (within a few weeks) put in what may prove to be the last great buying opportunity in the current bull market. I would not be surprised to see a shocking, sudden, sharp rise in developed stock markets in the very near future. The US stock market's powerful, record-breaking 5% rebound on December 26th was a signal that there are a large number of buyers around that lower weekly trend line.
Investors should have their shopping list ready.
Joshua Hall, ChFC
The True Vine Letter is a publication of True Vine Investments, the investment advisory business of Joshua S. Hall, ChFC, and a Registered Investment Advisor in the U.S.A. The information presented is for educational purposes only and should not be regarded as specific financial or investment advice nor a recommendation to buy or sell securities or other investments. It does not have regard to the investment objectives, financial situation, and the particular needs of any person who may read this Letter. In no way should it be construed as personalized investment advice. True Vine Investments will not be held responsible for the independent financial or investment actions taken by readers. All data presented by the author is regarded as factual, however, its accuracy is not guaranteed. Investors are encouraged to conduct their own comprehensive evaluation of financial strategies or specific investments and consult a professional before making any decisions. Positive comments made regarding this Letter should not be construed by readers to be an endorsement of Joshua Hall’s abilities to act as an investment advisor.