J.C. Parets on Fox Business

Last week, All Star Charts’ J.C. Parets appeared on Fox Business to give his take on the current state of the market.

J.C. begins by sharing that while Weekly closing prices are important, Monthly closing prices are even more important. Further, he states that the significant moves made in January, combined with the fact that seemingly everyone thinks we will retest the December lows (around 2,350 on the S&P 500), is a good sign that we may actually test all-time highs again, before seeing another downward move. J.C. is a big proponent of the “weight of the evidence approach” when it comes to evaluating the market, and with a large portion of different indices finishing the month at or near their highs for the period, the path of least resistance remains to the upside.

Later, J.C. goes on to point out that while the market averages an 8% annual return, we never really see an 8% return. Annual returns typically come at one extreme or the other and 8% is just that, an average. In fact, many people have attempted to drill this fact into the heads of investors and traders. I have pointed this out a few times myself:

Predicting annual returns just isn’t that simple and it’s ridiculous to pretend that is. And as J.C. states in the video, with the market in the middle of a massive trading range (pictured below), this makes the situation even more complex than simply pinning your prediction on a “historically average” return. We aren’t in a clear trend, like 2008 (down), 2013 (up), or 2017 (up). Right now, even after the strong move off the Christmas Eve lows, we are in “no man's land” and literally right in the middle of this 600 point range.

J.C. finishes up by mentioning two areas to keep a close eye on Regional Banks and Broker-Dealers, both sub-industries of the Financial Services sector. Specifically, he says that we want to see both of these areas to remain above their 2007 highs, as depicted in the charts below

Regional Banks (KRE)

Broker-Dealers (IAI)

Overall, I think J.C. makes a very level-headed assessment of the current landscape in US equities markets. January was great for the broad indices and even better for multiple Sectors and their sub-industry components. And yes, the move up should continue, especially given the fact that consensus seems to be that we will take one more leg down. However, given that we are still in the middle of a large trading range, there is no “crystal ball” giving a clear picture of where the long-term trends end up.