A Break in the Action

This week, we finally saw some sustained selling in the US and global markets. Many in the media have speculated about when the overextended markets would have a pullback, and we could be seeing the start here of a correction. We would not expect a correction to last long since all Core Indicators remain positive, so there has been no corrosion of the long-term Bull Cycle. The Long Term Momentum Indicator has another positive reading for January, which makes 18 straight months of positive readings and continues the longest streak our indicators have ever recorded. Volatility has spiked significantly this week, with the VIX moving up close to 60%. Although we have some short-term worries about weakness that could materialize into a correction, overall we still are auspicious on the Bullish trend.

 

The Tactical Indicators have begun to reverse this week. The 10-week has turned back downward from the 78% level back down to the 64%, which is a neutral reading. As we have seen historically, a move to the High Risk zone oftentimes cycles down. The big question is how far it will fall if it continues. In 2016, we saw a move all the way down to the Low Risk zone, but in 2017, we saw a slower erosion pattern. The MSCI All Country World Index appears to have hit the 550 resistance level and turned back downward towards the 533 level, a loss of 3%. This reversal move brings us back from the Highly Overbought levels that were swiftly attained. A continued move would bring us back through the Overbought level into neutral channel. We will closely monitor these indicators for signs of short-term weakness and look for opportunities to put capital back to work.

 

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2018-03-05T16:05:50+00:00 February 2nd, 2018|Uncategorized|