Six weeks into the year, and we see a break in the slow grind upwards for US and global markets that was typical of most of 2017. We expect that this rise in volatility should provide the backdrop for most of the price action for the near future. The reading for the Cash Comparison has improved to Positive this week. We are not sure if the indicator reversal and market rebound is the first move in a larger correction or possibly part of a series of corrections. In a week, markets have gained back about half of what was lost in the first part of February. What we have not seen is a reversal in the Universe Trend Indicator, which is more of a leading indicator. If we do not see that turnaround take place, then we would expect that the recovery could accelerate and bring markets to new highs before the end of the seasonally stronger six-month period, historically speaking.
The Tactical Indicators have been moving very quickly as of late. The 10-week has moved to a more bullish alert status at a reading of 34%, which is up from the Low Risk zone. We still have not seen enough movement to discern what pattern the chart will follow, especially since the market has been very emotional with a seemingly short memory recently. Whether or not the recovery is quick, there should be an opportunity to redeploy capital. The MSCI All Country World Index has gained back about 5% from its bounce off the 500 support level. The Overbought/Oversold Indicator has bounced back into the higher part of Neutral zone above the Bull Trend Average. Ideally, we would hope for a move downward to the Oversold region along with the lower risk 10-week, but we could be heading for another Overbought condition just as easily if the euphoria comes back into markets. It is difficult to predict. One thing is for sure: moves such as these could become more commonplace as volatility and uncertainty rise.
For position and performance data, please view the Weekly Update video. If you are not yet signed up to receive the Weekly Update video and would like to receive it for a limited time, then please click on the following link and let us know that you found us through our Blog: Request Weekly Update.