August 2017 Market Commentary

This is the time of the year where things can get interesting.  For example, here in Texas, we’re looking at a potential Category 3 hurricane heading our way.  And we’re already seeing rain here in Austin from the far edge of it.  Beyond crazy weather, this is the time of the year where the stock market can act a bit crazy as well.  According to the Stock Trader’s Almanac, September has the highest probability to show a negative return in the broad markets.  However, there are a few metrics we’re watching that suggest anything negative could be short lived.

According to CNBC (Earnings), this past earnings season showed earnings growth beyond expectation.  That’s good news!  Long term, what drives the stock market is whether or not companies are making money.  At the end of the day, this is far more important than political posturing.  The news media may make it sound like the world could be coming to an end at any moment, but we’re finding this is more of a distraction from the realities of how the stock market is truly acting.

Minutes after we sent out the EXTRA newsletter two weeks ago, I received an email from Tom McClellan, a widely sought lecturer on market signals, which said basically the same thing about using volatility as an indicator (he just said it much more eloquently; see his article here).  McClellan described how volatility spikes (by way of the VIX index) have led to favorable buying opportunities this year, not the start of any sort of panic selling.  We’ve been using this same signal as buying opportunities this year for our clients.

Lastly, I’ll leave you with an update on the NYSE Advance-Decline Line.  Two weeks ago, we felt it was signaling caution.  But now, it’s feeling like we may be getting back to “normal.”  We continue to watch this closely, of course.

 

One Year Chart of the NYSE Advance-Decline Cumulative Average (Stockcharts.com)

Let us know if you have any questions or need anything investment-related.  And if you’re in Texas this weekend, we hope you stay safe and dry out there!!