Technically Speaking – August

technical financial chart for August 2021
September 2, 2021

Long Term resistance: SP500 4570 – 4600
Long Term support: SP500 4390 – 4350 then 4250 – 4200

Markets keep marching higher. August had some volatility but still ended with a gain of 3%, which is 2%+ higher than the historical norm. We can give many examples of why the Markets are at lofty valuation levels, but they just keep moving higher. Going forward, September is traditionally a weak month for stocks. Last year the S&P 500 dropped more than 8% in September before closing with a loss of 4%. With that knowledge and the fact, we are close to long-term resistance; a pullback would be a likely scenario in the short term. How far down and for how long is anyone’s guess, but I think 3 to 5% and then finding bottom and snapping back. Trimming some positions at this point in the market cycle makes sense. Having some cash is necessary to be able to take advantage of any opportunities over the next month or two. Use the recent news highs to take some money off the table and look to buy back under SP 4400. The markets can move swiftly, so be ready to move quickly. Here are the reasons I would feel comfortable to buy on a pullback in the face of current conditions: earnings have been at record highs, earnings estimates continue to increase, profit margins are at record highs, interest rates are staying low, and the Fed and ECB continue to support the markets with bond-buying stimulus. Couple all these with fearless new investors making up 26% of the investing public, and the Markets will continue higher… until they DON’T.

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