Investors have been sitting on pins and needles as the S&P 500 (SPY) broke below the 200 day moving average. However it appears that disaster may have been averted with the rally this week. Steve Reitmeister shares the full story in the commentary to follow.
The only investment story worth talking about is whether the S&P 500 (SPY) is above or below the 200 day moving average and what that means for the stock market outlook.
Remember that we broke below that important level on 3/10. History says if we don’t break back above within 3 weeks…then MUCH greater odds of bear market on the way.
So, let’s see where we stand today, and what that means for bull vs. bear debate.
Market Outlook
(Yellow = 50 Day Moving Average @ 5,913 / Orange = 100 Day MA @ 5,933 / Red = 200 Day MA @ 5,757)
Indeed we broke back above the 200 day on Monday on an impressive rally after President Trump seemed to soften his hardline stance on tariffs. Investors are hopeful that is a sign of things to come.
However, one close above an important trendline can often be seen as a head fake with a reversal shortly thereafter. That is why it was so good to see a 2nd straight close above on Tuesday @ 5,776.
Right now, these facts GREATLY improve the outlook for stocks. Because staying below the 200 day moving average into next week historically has meant “watch out below” with much more downside on the way.
The key going forward is really about the Trump administration increasing the level of transparency on what happens next…thus removing much of recent uncertainty.
“Uncertain” was the keyword used over and over by Chairman Powell at the 3/19 Fed meeting. As in…
Tariff effects are uncertain
Other policy changes are uncertain
Path of inflation is uncertain
Path of employment is uncertain
Path of economy is uncertain (the Fed reduced their GDP outlook from +2.1% to 1.7% for the full year of 2025.)
Given all this uncertainty Powell mentioned that the Fed believes they are “well positioned” for whatever comes next. Meaning if inflation goes up because of tariffs, then they can raise rates and tamp things down.
However, if inflation keeps coming down and/or employment weakens because of a decline in economic outlook…then they will lower rates.
Investors clearly assumed the latter was more likely which is why the market rallied strongly on the news. On top of that the odds of a rate cut by their June 18th meeting has increased to 61%.
One last important note on the economic front came from yesterday from the S&P PMI Composite report which spiked to 53.5 from 51.6 last month. This is a far-reaching report about the state of the US economy which shows that weakness reported in reports over the past month may be a transient event with better results on the way.
To sum up…the healthier the stock market looks…and the more economic data looks solid…then the more likely the early 2025 action was just a healthy correction in the midst of a long term bull market.
As such I am prepared to put some of our cash to use in new stocks for the Reitmeister Total Return portfolio. The tricky part is the concern that another round of “uncertainty” over tariffs takes place with stocks heading lower once again.
That might happen because of new policies on our part, or detrimental retaliatory tariffs from our trade partners. So, I will slowly roll out new stock additions as not to get too aggressive too early with this risk still looming in the air.
Gladly we have played the early 2025 weakness quite well by having a large cash position on hand plus the timely short of TSLA. I like our odds to continue to navigate our way to a successful year-end result.
What To Do Next?
Check out my portfolio with hand selected picks for the current market environment:
- 8 stocks to buy
- 1 stock to short
- 1 ETF to buy
All the stocks have been selected using the proven outperformance that comes from our POWR Ratings stock selection model which has done 4X better than the S&P 500 since 1999.
Now add in my 44 years of investing experience seeing bull markets…bear markets…and everything between. This helps me pick the right stocks for the current environment.
If you are curious to learn more, and want to see my current 10 recommendations, then please click the link below to get started now.
Steve Reitmeister’s Trading Plan & Top 10 Recommendations >
Wishing you a world of investment success!
Steve Reitmeister…but everyone calls me Reity (pronounced “Righty”)
Editor, Reitmeister Total Return
SPY shares were trading at $575.27 per share on Tuesday afternoon, up $1.19 (+0.21%). Year-to-date, SPY has declined -1.84%, versus a % rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks.
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