The following is a summary of our recent interview with Louise Yamada of Louise Yamada Technical Research Advisors, which can be listened to on our site here or on iTunes here along with our weekly market wrap-up and Big Picture.
The picture remains murky when it comes to U. S. equities, and market observers aren’t sure what to make of current conditions, noted Louise Yamada on Saturday.
The current situation is hard to decipher, Yamada noted: ‘It’s very complicated for everybody, even for the professionals at this point.’
She proposes three scenarios likely to emerge: a 40 percent chance of a trading range forming, a 40 percent chance for a breakout to new highs, and a 20 percent chance for a resumption of the bear market.
Looking back for historical precedent, Yamada noted that the first interest rate increase in 1946 coming off the deflationary pressures preceding that time saw the market suffer a 23 percent decline. After that, though, the market traded sideways into 1949.
This might indicate we’re looking at an emerging trading range around 11 to 13 percent, Yamada said, somewhere between the May high and the January low around 1850 to 1875 on the S&P 500.
‘It’s conceivable that we continue to fluctuate and frustrate within this range for a period of time,’ she said. ‘The other possibility is that we garner enough strength to move to new highs, but we don’t really have a trending leadership.’
No Clear Leaders Yet
We’ve seen a quick rotation between sectors from defensive to offensive, Yamada noted. As of last week, the only sector that’s outperforming the market is healthcare, which likely won’t be enough to lift the broader market to new highs, she said.
This post was published at FinancialSense on 06/08/2016.
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