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S&P 500 Index: Summer Is a Time for Patience and Endurance

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This year, the market is even harder to predict than usual.

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Come what may, all bad fortune is to be conquered by endurance.
--
Virgil

Summertime -- July 4th to Labor Day -- is typically the most bizarre time of the year for the markets; low volume, uncanny swings, no apparent underlying rhyme or reason to its action. This year is no different, if not even worse considering the political mayhem, China slowdown concerns and the remnants of EU issues. Actually, since the July 29 EU recapitalization announcement the majority of news coming from the European PIIGS nations has become more of a non-catalyst pushing the tape. Regardless of reasons, during these uncertain times it's important to ascertain the terrain and define the investment roadmap.


Click to enlarge

When evaluating the above "roadmap" (S&P 500 Index (SPX)), investors can see the shift in counter-cyclical trends in Dec-Jan and mid-May. These secondary trends dictate the shorter term moves – one to 12 months – within the larger cyclical trends – one to five years. As of the May break of the secondary bull trend, the market has entered a neutral zone where clarity of a defined bull or bearish stance is not 100%. Nevertheless, the technical pattern has formed a two-month bear flag riding up the backside of the previous trend; again providing no true clarity as of yet. It is only when this flag is broken, up or down, to where some clarity will arise and the risk/reward measurement can be more accurately calculated.

As for now, it's a game of patience and endurance. This is a good time to evaluate the potential moves when the flag breaks and not to guess the pending direction.

Editor's Note: Read more at Tesseract Asset Management.

Twitter: @TAM_News
No positions in stocks mentioned.

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