The Line of Defense

The stock market has been struggling for most of this year. Mainly, it is trying to digest the gains from 2016 and 2017. During this time, it has been vital for the markets to hold critical long-term support levels.

Looking back at 2018, initially, concerns over higher interest rates and inflation ruined the January advance and brought an end to the 15-month bull market advance. More recently, tariffs and the threat of trade wars and geopolitical concerns cast doubts for investors. In fact, the S&P 500 has actually spent a lot of time in negative territory for 2018.

How vulnerable is the market to a significant decline?   Where is “the line of defense” at which investors will step in and buy and thereby, support prices?

On Thursday, May 3rd, a clear line of defense at 2600 for the S&P 500 was supported. Institutional buyers stepped in and supported the markets at a critical juncture. Since this level was the third time the line of defense held, it lends confidence to the premise that downside risk in the stock market is reduced for the short term.

After the line of defense held, the markets staged a torrid rally gaining 130 points on the S&P 500 and 1400 points on the DOW, so far. Bullish indicators have emerged during this time and some of the concerns which have prevailed this year, have eased. Most importantly, the downtrend in the stock market since February has been broken, whereby, more bullish conditions can prevail.

The graph displays trading activity over the past several months. You can see the clear support that was recently carved out near 2600 on the S&P.

This recent reversal in the trend raises hopes that an uptrend in the markets can be sustained. Correspondingly, we have widened our list of equities and increased our weighting to reflect a more bullish posture.

Peregrine Asset Advisers ● 9755 SW Barnes Rd. Suite 295 ● Portland Oregon 97225
503.459.4651 ● 800.278.1420 ●

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*Past Performance is no guarantee of future results. Investment management involves the possibility of losses. Significant general stock market moves up and down can influence the performance of client portfolios. Composite returns are based on client portfolios of over $100,000. Not all clients are included in the composites. All returns include the reinvestment of dividends. All returns are net of fees. Composite returns are derived from aggregated, time weighted returns for clients of Peregrine Asset Advisers. Individual client returns can deviate from the composite returns. While Peregrine uses the S&P 500 as a benchmark, Peregrine does not attempt to mimic the structure of this index. Individual client portfolios vary. The number of stock positions also varies per client.