Each week we try our best to pass along some news and hopefully useful information. We look at markets and financial news and how we can be most helpful in serving our client’s needs.

Oftentimes our eletter content is prompted by current events and now is one of those times. Even though something in the news brought us to today’s subject, it is actually something that should never be too far away from your consideration. Accordingly, if you think it would be useful for your kids, grand-kids or friends, please feel free to share our eletters with them.

This past week I saw several reports on ‘financial news’ cable channels which were illustrating the plight of government workers who have been laid off.  It appears from those reports that many workers are in dire straits after missing one paycheck. That’s a sad situation for sure and, in many cases, it could have been avoided. So, I would like to reiterate ‘Rule 101A of Financial Planning’. It goes like this: Before you begin investing or house buying, and/or all those other fun things that fall under the financial planning umbrella, set aside enough money to cover a few months’ worth of your expenses.  How much exactly? Well, that’s up to you.  Some people are comfortable with 3 months’ coverage of living expenses, and some are not comfortable unless they have 6 months’ coverage or even more.  No matter what the number, a contingency savings account (or emergency account, or whatever you want to call it) is pretty handy when those unexpected expenses pop up. Whether it’s a new set of tires or replacing a dead washing machine, it feels so much better to just tap that contingency account – rather than reaching for a credit card.  When it comes to something much bigger – the unexpected layoff for example- one can sleep so much better knowing that a few months’ worth of living expenses are ‘in the bank’.

Once you have funded that contingency account, you’ve started a good foundation, and can move on to more interesting financial areas.

While I’m talking about basics, I’ll take this opportunity to mention another area that comes up- more often than you might expect.  Most of you (and perhaps your kids or grand-kids as well) have various accounts that have a beneficiary designation.  That is an assignment that tells the custodian of the account who should own your assets should you pass away.  It seems odd how often we mention this and find that someone has had a major life event (such as a marriage, divorce, new kids, etc.) and has given no thought to making a beneficiary change.  It’s really not unusual to find that a second marriage happens, and someone forgets to change the beneficiary of their group life insurance coverage or even their 401k account to the new spouse. We’ve seen this happen twice in the past two months. So, a word to the wise: check to be sure that you have a beneficiary. Ideally also have a second beneficiary — just in case it’s needed.  OK, enough, and I’ll stop nagging for another year or so.

Market Minute – State of the Markets

It’s been pretty difficult of late to make sense of the headlines. As is often the case, a claim made in one headline is contradicted in the next. This is a valid complaint when applied to all news, but in the area of financial and business news it cuts closer to home. Frequently, one can’t quite make out if the headline is a) living up to its journalistic obligation to inform, b) sell us an idea, c) mere clickbait or d) something else entirely. The focus I have in mind is the variety of views of the behavior of the S&P 500 Market Index*. Well, pundits and headline writers aside, the best way to glean some useful information is to look at the actual data. So, please have a look at this chart of the ticker SPY, which is a very close approximation of the S&P 500 market index. For a variety of reasons, I prefer to use this as a general marker of the state of the market.

The candlesticks (the red and white boxes) indicate the scope of the market’s changes a week at a time. A red box shows markets moving down for a week, and a white box shows markets moving up for a week. Note that the past few weeks have seen a nice bounce up – those are good for headlines. And that’s the sum of the good news on the chart.

First take a look at the numerical values arranged vertically on the right side of the chart. These are different price points that SPY may be trading at. Next note that the current price for the SPY is $261.83 (at of the moment this chart was printed) Now look at the blue line — which is an historical trace of previous average weekly values. Today’s price (the 261.83) is lower than the blue line’s long-term average of pricing. That’s generally negative for markets. Note next that the red line (the shorter moving average) is below the blue line (the longer moving average). That’s also generally a negative for prices in the markets. Then see the lighter colored red and green bars at the bottom. These indicate the volume of dollars going into and out of the SPY. These bars tell us that on ‘down weeks’ there has been a lot of dollar flow out of the market – see the light red bars. They also tell us that on ‘up weeks’ there has not been much in the way of dollars going into the markets – see the light green bars. This tells us that sellers are pretty aggressive at this time, and buyers are pretty timid. In order to not over-crowd the chart with data I chose not to add an indicator for the VIX (the ‘fear’ index). The VIX, however, indicates that there is quite a lot of fear in the marketplace.

So, bottom line, things are negative until they are not. The longer term and intermediate term measures show a down-trending market. The volume bars show that buyers are not very committed. And the VIX still indicates that buyers are hesitant to commit. 

Taken altogether these indicate that, for now, we need to be cautious in our equity exposure. When we have an up-trending market (not now) surprises tend to be to the up side. In a down-trending market, however, surprises tend to be to the downside. We are anxiously waiting for Mr. Market to clarify his next major direction. 


Ronald P. Denk, CFP®
Investment Advisor
Denk Strategic Wealth Partners
10000 N. 31st Avenue, Suite C-262
Phoenix, AZ 85051
Phone (602) 252-8700
Fax (602) 252-8701
Toll-Free (877) The-Denk

This weekly article reflects news, commentary, opinions, viewpoints, analyses and other information developed by Denk Strategic Wealth Partners and/or select but unaffiliated third parties. DSWP provides Market Information for illustrative and informational purposes only. If you wish to receive this weekly commentary by email please contact us at 602-252-8700 or by e-mail at lindaw[@]denkinvest.com. If you are receiving this commentary via email and would prefer not to please let us know either by email or phone.

Ronald Denk is an Advisory Representative offering services through Denk Strategic Wealth Partners, A Registered Investment Advisor. He is also a Registered Representative, offering investments through Lincoln Financial Securities Corporation, Member FINRA/SIPC.

Denk Strategic Wealth Partners is not affiliated with Lincoln Financial Securities Corporation. Information in this commentary is the sole opinion of Denk Strategic Wealth Partners. Past performance is no guarantee of future returns. All market related investments involve various types of risk, which include but are not restricted to, credit risk, interest rate risk, volatility, going concern risk, and market risk.

The Update provides information of a general nature regarding legislative or other developments. None of the information contained herein is intended as legal advice or opinions relative to specific matters, facts, situations or issues. Additional facts, information or future developments may affect the subjects addressed in this document. You should consult with an attorney, accountant or DSWP planner about your particular circumstances before acting on any of this information because it may not be applicable to your situation.

Lincoln Financial Securities and Denk Strategic Wealth Partners and their representatives do not offer tax advice. Please see your tax professional regarding your individual needs.

*The indices are representative of domestic markets and include the average performance of groups of widely held common stocks. Individuals cannot invest directly in any index and unlike investments, indices do not incur management fees, charges, or expenses, therefore specific index returns will be higher. Past performance is not indicative of future results.