Cross-Asset Strategist & Quantitative Analyst, Pennock Idea Hub

Cam Hui

Cross-Asset Strategist & Quantitative Analyst

Pennock Idea Hub

We are creators of independent equity research. The Pennock Idea Hub team are veterans of the investment industry. Much of our team has spent their careers at Merrill Lynch, Deutsche Bank, RBC Capital Markets and Wood Gundy. We have taken every aspect of research back to the studs and returned to first principles. The Pennock Idea Hub marries the interests of the sell and buy side. 

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Cross-Asset & Quantitative Research

Cross Asset Strategy

S&amp;P 500 long-term breadth is deteriorating as the percentage of S&amp;P 500 stocks above their 200 day moving average has retreated from a “good overbought” advance reading of 90%. Past episodes have resolved themselves either with a period of sideways consolidation or sharp pullback. Based on our analysis of the macro and technical backdrop, the sideways consolidation is the more likely scenario. Arguably, stock prices have been undergoing a period of sideways movement beneath the surface owing to the bifurcation between growth and value stocks.

S&amp;P 500 long-term breadth is deteriorating as the percentage of S&amp;P 500 stocks above their 200 day moving average has retreated from a “good overbought” advance reading of 90%. Past episodes have resolved themselves either with a period of sideways consolidation or sharp pullback. Based on our analysis of the macro and technical backdrop, the sideways consolidation is the more likely scenario. Arguably, stock prices have been undergoing a period of sideways movement beneath the surface owing to the bifurcation between growth and value stocks.

For several weeks, we have been calling for a choppy sideways market, but the S&amp;P 500 continues its upward grind. To be sure, the index pulled back about 2% last week and briefly tested its 50 dma, but its upward trajectory has been relentless.A discussion with another chartist raised the possibility that the market has been undergoing a stealth correction. As good technicians know, corrections can occur in price or in time. Beneath the surface, market internals have been correcting in both price and time.This is still a bull market. Investment-oriented accounts should remain bullishly positioned and be prepared to buy any weakness. Traders may wish to wait on the sidelines until a definitive trend becomes evident and be prepared to buy either the panic bottom or the upside breakout.

For several weeks, we have been calling for a choppy sideways market, but the S&amp;P 500 continues its upward grind. To be sure, the index pulled back about 2% last week and briefly tested its 50 dma, but its upward trajectory has been relentless.A discussion with another chartist raised the possibility that the market has been undergoing a stealth correction. As good technicians know, corrections can occur in price or in time. Beneath the surface, market internals have been correcting in both price and time.This is still a bull market. Investment-oriented accounts should remain bullishly positioned and be prepared to buy any weakness. Traders may wish to wait on the sidelines until a definitive trend becomes evident and be prepared to buy either the panic bottom or the upside breakout.

The stock market has begun to pull back after an upper Bollinger Band ride. The clues to the next major directional move can be found in breadth indicators, which are mixed, and small-cap stocks, which remain range-bound. In addition, the small-size effect is indirectly linked to value. An upside breakout by small-cap stocks should be bullish for value stocks, while a downside breakdown should see leadership by large-cap growth.Stay tuned.

The stock market has begun to pull back after an upper Bollinger Band ride. The clues to the next major directional move can be found in breadth indicators, which are mixed, and small-cap stocks, which remain range-bound. In addition, the small-size effect is indirectly linked to value. An upside breakout by small-cap stocks should be bullish for value stocks, while a downside breakdown should see leadership by large-cap growth.Stay tuned.

Recently, a number of major investment banks have published warnings for the U.S. stock market. The strategists at BoA, Citigroup, Credit Suisse, Deutsche, Goldman Sachs and Morgan Stanley have issued either bearish or cautionary outlooks.In these circumstances, we are reminded of Bob Farrell’s Rule 9, “When all the experts and forecasts agree – something else is going to happen.” How should investors react? Turn cautious, or is this a contrarian opportunity to buy the dip?We expect a period of choppiness and market volatility for the remainder of the year. Long-term investors should remain fully invested. Downside risk shouldn’t be more than a normal 10% correction, which represents typical equity market risk. There are many open questions about market leadership. A prudent course of action would be to hold a diversified portfolio as a way of addressing near-term uncertainties.

Recently, a number of major investment banks have published warnings for the U.S. stock market. The strategists at BoA, Citigroup, Credit Suisse, Deutsche, Goldman Sachs and Morgan Stanley have issued either bearish or cautionary outlooks.In these circumstances, we are reminded of Bob Farrell’s Rule 9, “When all the experts and forecasts agree – something else is going to happen.” How should investors react? Turn cautious, or is this a contrarian opportunity to buy the dip?We expect a period of choppiness and market volatility for the remainder of the year. Long-term investors should remain fully invested. Downside risk shouldn’t be more than a normal 10% correction, which represents typical equity market risk. There are many open questions about market leadership. A prudent course of action would be to hold a diversified portfolio as a way of addressing near-term uncertainties.

A Time for Caution, or Contrarian Buy Signal?

The U.S. stock market is undergoing a “good overbought” momentum-driven advance. Readings are not overbought yet, indicating further upside potential. In addition, cross-asset internals are suggestive of a possible value and growth inflection point ahead in favour of value and cyclical stocks.

The U.S. stock market is undergoing a “good overbought” momentum-driven advance. Readings are not overbought yet, indicating further upside potential. In addition, cross-asset internals are suggestive of a possible value and growth inflection point ahead in favour of value and cyclical stocks.

United States

SPDR S&P 500 ETF Trust is an exchange-traded fund incorporated in the USA. The ETF tracks the S&P 500 Index. The Trust consists of a portfolio representing all 500 stocks in the S&P 500 Index. It holds predominantly large-cap U.S. stocks. This ETF is structured as a Unit Investment Trust and pays dividends on a quarterly basis. The holdings are weighted by market capitalization.

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SPDR S&P 500 (SPY US)

Time For A Mid-Cycle Swoon?

S&P 500 long-term breadth is deteriorating. Similar past episodes have resolved themselves either with a period of sideways consolidation or sharp...

Cam Hui

A Correction in Time?

As good technicians know, corrections can occur in price or in time. Beneath the surface, market internals have been correcting in both price and...

Cam Hui

Breadth Can Show the Way

The clues to the next major directional move can be found in breadth indicators, which are mixed, and small-cap stocks, which remain range-bound.

Cam Hui

A Time for Caution, or Contrarian Buy Signal?

We expect a period of choppiness and market volatility for the remainder of the year. Downside risk shouldn’t be more than a normal 10% correction.

Cam Hui

A Consolation Prize for the Bulls

The U.S. stock market is undergoing a “good overbought” momentum-driven advance. Readings are not overbought yet, indicating further upside potential.

Cam Hui

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