Why Last Week Signals Gains for Your Portfolio
I love it when a week ends on a high note.
And last week certainly did — the S&P 500 climbed well over 1.5% on Friday after slipping lower to start the week. Friday’s price action caught a lot of people by surprise. Too many investors had been expecting the market to keep selling off, but the technicals didn’t agree.
One big benefit of technical analysis is that it helps us see opportunities as they arise, not in hindsight. I think that the quote above from Mark Twain describes how so many investors feel about their investments: they’re caught off guard when big moves happen and say, Oh yeah — I should have bought there. I want to make sure that you’re not in that group.
To do that, I want to show you why last week’s price action points to bigger gains for your portfolio this summer…
Below is an updated daily chart of the S&P 500. At first glance, you’ll probably spot something interesting about it the last month or so:
The last time I showed you a technical chart of the S&P was back on June 18, when things were looking very different (you can click here to see that one). At the time, the technicals were still looking positive, just not as positive as they are now. Since the market bottomed at the start of June, it’s been making an orderly ascent in an uptrending channel.
That channel is important — it provides us with a very clear picture of how much the market can pull back before we should start getting worried. It also told us that despite selling pressure to start last week, we didn’t have to be overly concerned; after all, Mr. Market stayed within that channel the whole time.
Better yet, the S&P bounced hard off of trendline support on Friday.
The last three times the S&P bounced off of support that hard (marked by the blue arrows) brought us a mini-rally that tested resistance. That’s why Friday’s price action is such a big deal — it means that we’re still in the uptrend right now. And since it happened on essentially no news, it means that it was entirely technically driven.
That’s why last week’s price action is signaling gains for your portfolio this summer.
Happy Trading,
Jonas Elmerraji
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Jonas Elmerraji
Jonas Elmerraji, CMT, is the co-editor of STORM Signals and Penny Stock Fortunes, and a contributor to Agora Financial’s Trend Playbook. Jonas got his start on the fundamental side of the market, poring over financial statements and valuations to find sound investments – today, he specializes in blending fundamental and technical analysis. Jonas is a senior contributor to TheStreet.com, and has been featured as an investment expert in Forbes, Investors Business Daily, and CNBC.com among others.
Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.
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