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Watch for Cyclicals bottoming for sign of new up cycle

You have to be impressed by the persuasive power of price movement on sentiment and headlines. I’m obviously just a bit biased, but the sudden reversal from bearish to bullish headlines only reinforces the importance of including technical analysis in one’s investment process. Why? Well, despite the short-term wiggles that have developed through the summer, the longer-term technical backdrop has served as a very helpful steadying perspective through all the headline noise.

Pull up a monthly chart of the S&P 500 on your favorite charting software for a longerterm perspective that steps back from the near-term wiggles that dominate headlines. What you’ll see is a market index that has traded in a very narrow range following a major rebound from its secular uptrend using the 200-week (4-year) moving average. In fact, as I’ve regularly highlighted here, 2019 looks very similar to 2016 which was another period when equity markets stalled in the shadow of pending global recession… that never happened.

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