Friday marked both the end of the month for the markets and the end of the quarter. Since the S&P500 topped in late January, stocks entered an immediate correction after a rally that had lasted since the November 2016 election. But the good news is that stocks later bounced upward before prices could decline below their 200-day moving averages.
The 200-day moving average (MA) is a key threshold dividing a bull market from a possible bear market. The 200-day MA is simply the average of all prices over the last 200 trading days (about 10 months) for a security, updated daily. The fact that stocks refused to plunge below the 200-day is a bullish signal, and investors should be encouraged. Further encouragement is that the 200-day MA itself is pointed up and has not begun to flatten, let alone to turn down.
But we have yet to see new highs since late January. When will we see new highs?
The market action we have seen since January top is normal, bullish behavior in stocks, serving as a reminder that investors should be patient about anticipating future gains. The big move from the 2016 election to January 2018 is the exception rather than the rule.
Our ETF trend-following systems took a breather in Q2 2018, incurring small losses after six consecutive quarters of gains. On balance, our ETF systems, rebalanced monthly and quarterly, tend to show quarterly gains 75-80% of the time.
All quarterly and monthly ETF systems shall be fully invested for Q3 2018. But the sideways market action we have seen for several months now could easily continue into Q4 2018.
Seasonal tendencies in the markets suggest a slowdown in the summer and early fall period of the year. That’s especially true for Q2 and Q3 of a mid-term election year like this one. In the four-year presidential cycle, the two worst-performing quarters are typically Q2 and Q3 of a mid-term year. But Q2 2018 was not a bad quarter by any stretch of the imagination. That’s also a good sign. Even better, the fourth quarter of a mid-term election year and the following quarter are the two strongest in the entire 4-year cycle. So, we have those quarters to look forward to.
Our more actively traded systems showed a slight gain for Q2 2018, drawn mostly from individual stock systems Stillpoint manages. Netflix (NFLX), included in both Stillpoint’s weekly and monthly individual stock systems, had a very strong month, up over 11%. For the quarter, NFLX was up almost 40%. Currently, Stillpoint’s individual stock systems are fully invested as well.
