February 27, 2019

The S&P 500 is overbought and a pullback is warranted, but with that said, rather than a big pullback, we are expecting a modest period of consolidation. After the 19% waterfall selloff last year, the market has been set-up with good odds to move much higher over the next 12 months.

02-27-2019 SPY

 

Apple, Amazon and Alphabet account for around 9 percent of the S&P 500 and around 27 percent of the Nasdaq 100 ETF. Thus, the next directional move in these three will clearly impact the broader market. Apple, Amazon and Alphabet are lagging many of their peers because they are below their 200-day simple moving average (SMA). In contrast, Intel, Microsoft and Cisco are above their 200-day SMA and up year-to-date. If Apple, Amazon and Alphabet start to move, look for the NASDAQ to move much higher.

  • The Conference Board Consumer Confidence Index surged 9.7 points in February to 131.4, above the consensus of a 3.8-point pickup to 124.0.
  • It was the first increase in four months and the most since August 2015.
  • Consumer confidence suffered due to increased financial market volatility in the last few months of 2018 and the partial government shut down.
  • The rebound this month was led by expectations, but the assessment of present conditions also improved, reaching its best level since December 2000.
  • Confidence was higher across all demographics and most income groups (except for low-income).
  • The current level of confidence remains consistent with above-trend economic growth and suggests that consumer spending will remain the driving force of the current expansion.

Wealth Watch

Sign up for our weekly news to hear from CEO and portfolio manager, Vance Howard.