We haven’t used this headline in over five (5) months to describe the S&P 500 (SPY). Is this time different? In a word, yes. This time is different, specifically with regard to the FED. That said, the financial media got this message twisted on Friday, sending the market into a frenzy over the yield-spread. Outflows eclipsed $20 billion in equity funds alone.
Summary
“BAML FLOW SHOW: $20.7 BLN OUTFLOWS FROM EQUITY FUNDS, $12.1 BLN INTO BOND FUNDS IN WEEK TO MARCH 20, ACCORDING TO EPFR DATA”
Will these traders regret their decision to exit the equity market? Maybe they will, but caution was warranted going into the Mueller Report scheduled release. Maybe they had too much riding on equities. Only you can determine that weighting and measure your risk accordingly.
If your portfolio has too much risk. It’s always a good idea to check your allocations and rebalance occasionally. We have a large position in IVV and AGG as an example. The latter benefited from the $12 billion inflows noted by Bank of America.
In 2014, 2016, and 2017 bonds managed to rally with equities, so it should be no surprise AGG is doing well; 20 weeks and still running for fresh new highs. TLT broke out last week.
SPY Daily
All things considered, SPY daily is still trading near a major resistance zone, which bulls have attacked numerous times. The most recent attempt seemed ready to start trending until news broke of the 3-month yield dropping below the 10-year.
The “financial media spin’ is very interesting, so let me explain.
Prior to Friday, CNBC, FOX, and Bloomberg were all in a lather over the 2-year vs. the 10-year. No one mentioned the 3-month until Friday; so, now we’re to believe this is “the” standard?
Either way, whether we use the 3-month or the 2-year, we have at least 18-24 months before the markets make any major decision. A recession is the other worry; we covered that in the weekend video newsletter.
2-year Yield Spread
Wait for price action to confirm your decisions this week.
Join us today in the trading room for our LIVESTREAM broadcast during market hours, as we trade SPY and other new positions. Watch, listen and trade from 9:20 AM to 4:15 PM Monday through Friday.
Happy Trading,
Vinny
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