With the first half of the year ending, we are seeing a period of adjustment that could set up a better second half. There could be more volatile trading ahead, as we have seen the VIX fear index rise towards the end of June. It has pulled back, but the geopolitical and socioeconomic landscape has showed some more uncertainty. The market has been moving sideways, even a bit downward, since the Confirmed Up signal came on May 7. Stocks have pared losses to end the quarter. The Cash Comparison has showed no change since April; Cash has climbed above the Global Stock Index again, although not by much. We will have another Long Term Momentum reading at the end of trading this week, and we will report on it the week after next.
The Tactical Indicators have shown some movement this week. The 10-week has slipped below the 40% level, with short-term momentum to the downside. Unless we see a quick turnaround in stocks, the Indicator would continue to trend towards the Low Risk Zone. The Overbought/Oversold Indicator fell to about 6% below the Bull Trend Average, which means that we have reached an Oversold level. The actual price of the MSCI All Country World Index is very near the drops we saw earlier in the year to around the 500-support level. However, since the channel has been rising, we are now at Oversold, but now the Highly Oversold level is closely approaching that key 500-level. Sometimes, markets can correct in an actual drop or as the excesses work off over time. We are seeing both happen here. While we wait for the 10-week to move to Low Risk, we may consider a tactical entry into the markets given this consolidation. The shake out of risk may be winding down, but there could be an additional wave of selling, especially if volatility and uncertainty persist. We have been cautious for the first half of the year, but we are looking for opportunistic risk-reward entry points in the second half of the year.
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