My Present View Of The SP 500 Index: September 2024 Version (Technical Evaluation)

On this article, I’ll present a 50,000-foot view of the market utilizing the SPDR S&P 500 ETF (NYSEARCA:SPY) as a proxy for the SP 500 index and see if SPY is the place I ought to put my retirement funds. I’ll examine SPY to the iShares MSCI EAFE ETF (EFA), the Vanguard Prolonged Market ETF (VXF), and the iShares Core U.S. Combination Bond ETF (AGG). It’s been a couple of months since my final look on the broad market, so let’s see if something has modified from my final take that SPY was the way in which to speculate transferring ahead.

Chart 1 – SPY Month-to-month

Chart 1, you’ll be able to see that SPY is in a transparent bullish uptrend. It’s above a rising 10-month transferring common, and the transferring common is trending larger as nicely. Because the bear market backside in October 2022, SPY has solely had 3 month-to-month closes under the 10-month transferring common. I like to make use of the 10-month exponential transferring common (EMA) because it offers the large image, 50,000-foot view of the market. You possibly can see that proudly owning the ETF when it trades above the 10-month EMA is an effective rule of thumb. When the ETF trades under the 10-month EMA, that could be a good time to be out of the ETF. This isn’t an ideal technique, however I don’t know of an ideal technique. I’ve used this technique for fairly a while, and I feel this technique retains me out of bother.

Chart 2 – EFA Month-to-month with 10-Month EMA

Chart 2 reveals that international shares have achieved nicely lately. Like SPY in Chart 1, EFA has persistently stayed above an upward sloping 10-month EMA. In case you’re a bull, that’s what you need to see. EFA has closed at a brand new excessive, and new highs are all the time bullish for my part. EFA had an attention-grabbing month. You possibly can inform by the decrease wick of the candle that at one level within the month, the bears had management of EFA, driving the worth decrease as EFA reached a low of $73.91. Then issues reversed, and the bulls took management of EFA driving the worth again to new highs. The explanation for the change in course could possibly be many issues. The greenback declined this month, the Jackson Gap speech by Federal Reserve Chairman Powell, or one thing else altogether. Whereas I don’t know the rationale for the bullishness in EFA, I can see the bullishness in Chart 2 and that’s the reason I like to make use of worth and a transferring common to get the large image. EFA is bullish as it’s above an upward sloping 10-month EMA, and EFA closed at a brand new excessive.

Chart 3 – EFA:SPY Relative Energy with 10-Month EMA

Relative energy charts are excellent charts to assist traders allocate capital. Relative energy charts are straightforward to know. The black line in Chart 3 is a ratio of the worth of EFA to the worth of SPY. When the black line is falling, that implies that EFA is underperforming SPY. When the black line is rising, that implies that EFA is outperforming SPY. Chart 3 reveals that EFA, whereas doing nicely in isolation, has been underperforming SPY for over a yr. Even if EFA has been making new highs over the previous six months, as proven in Chart 2, an investor who invested in EFA as a substitute of SPY for the previous yr would have underperformed SPY. Based mostly on what Chart 3 reveals, I’ll maintain my cash invested in SPY and never put cash in EFA till this ratio trades above an upward sloping 10-month EMA.

Chart 4 – VXF Month-to-month with 10-Month EMA

Chart 4 reveals the efficiency of VXF for the month of September. This ETF hasn’t carried out nicely in any respect in September. VXF managed to have out a minimal achieve for the month of September. VXF had the identical candle sample that SPY and EFA had for September. The decrease wick on the month-to-month candle reveals promoting strain that ultimately dissipated. And, like SPY and EFA, VXF is buying and selling above an upward sloping 10-month EMA, which is bullish. Not like EFA and SPY, nevertheless, VXF wasn’t in a position to shut the month larger. It’s also attention-grabbing to see that VXF hasn’t reached a brand new excessive in nearly three years. Traders have most well-liked paying up for bigger capitalization shares which are present in SPY or EFA.

Chart 5 – VXF:SPY Relative Energy with 10-Month EMA

It needs to be no shock that Chart 5 reveals that VXF is underperforming SPY. Since SPY is buying and selling at new highs and VXF hasn’t seen a brand new excessive in fairly a while that was an enormous clue. Finally, this underperformance will change, and till then, I can’t put money into VXF over SPY.

Chart 6 – AGG Month-to-month with 10-Month EMA

With all of the discuss decreasing rates of interest, it’s not shocking that AGG did nicely in September. AGG was 1.46% larger in September, and AGG has risen 6.58% because the finish of April. AGG is buying and selling above its 10-month EMA and the EMA itself is trending larger, which makes AGG bullish for my part. AGG can be placing in a collection of upper lows and better highs, which is the definition of an uptrend. The October 2024 low is larger than the October 2023 low. The April 2024 low is larger than the October 2024 low. The February 2024 excessive is larger than the Might 2023 excessive. The August shut is larger than each of the earlier highs. A brand new uptrend has been established.

Chart 7 – AGG:SPY Relative Energy with 10-Month EMA

As talked about earlier than, simply because an asset is performing nicely in isolation, that does not imply it’s the greatest place to place your cash. Chart 7 reveals that traders nonetheless choose equities to debt. Whereas which will sooner or later, proper now, it’s higher to put money into SPY versus AGG.

In abstract, SPY, EFA, VXF and AGG are all buying and selling above their upward sloping 10-month EMAs. In isolation, they’re all bullish. Nevertheless, Charts 3, 5, and seven present that SPY is outperforming EFA, VXF, and AGG on a relative foundation. So, not a lot has modified since my final take a look at the broad market. I’m preserving my cash in SPY till issues change.