We hope you had a great week! With the contagion of coronavirus spreading to numerous countries (including the UK) this week, equity markets have been under pressure. During such times when it becomes increasingly noisy for investors, it becomes all the more important to refer to your trading process and position according to the facts, not opinions. In this week’s Trading Club video analysis I introduced our brand new Monthly Checklist report covering each of the markets and explained how I am putting the evidence into action.
Firstly, our Business Cycle Checklist remains positive heading into February, unchanged at +2.5. This suggests that the long term fundamental picture should support risk markets such as stocks.
Here you can see earnings estimates (in grey) rising in accordance with this expansion in the economy, with no apparent resistance overhead for the S&P 500.
With the long term trend clear, the question that everyone has is whether there will be a correction in the short term given the headwinds generated by the coronavirus. In order to preserve the value of our content for our members, I have partially obscured the scores on our US Equities Checklist shown below, though what I can say is that the score this month is very clear indeed (+/-4 in magnitude - though I can’t say which way here just yet!).
Our Trading Club members know the score and received the first notice of this as soon as the report was released earlier this week. With both a long term and short term view on the market, it becomes much easier to trade tactically with the advantage of this information on your side. Furthermore, one of the stocks on our watchlist had a decent earnings announcement today and is trading more than 5% higher above the previous resistance level.
It's always great to see one of your favourite stocks become even better value following solid earnings, even if the price has also gone up. As I explained last week, this company may have already advanced quite considerably, and looks to have a lot further to continue too.
Time will tell how this all plays out, but what’s clear is that things are becoming far more complicated in markets and it has never been more important to trade with a proven process. Recognising this as professional investors, we provide our Checklists for a range of markets at the Trading Club and update them for our members on a monthly basis with video updates each week tracking the evolution in markets.
Have a great weekend,
James Helliwell | Chief Investment Strategist