The Setup

Once again, this week, volatility is on the rise and with larger ranges in both the US and world indices, the correction appears to be continuing in the long-term Bull market cycle. The indicators have changed in our model, with the Universe Trend Indicator swinging to Negative and both the Cash Comparison and Long Term Momentum now in Neutral territory. The Long Term Momentum specifically has snapped its 20-month string of positive readings in moving to Neutral at the end of March. To remind our audience, the Universe Trend Indicator is more of a leading indicator, but overall, the fact that it has moved to Negative should not be perceived as too alarming. We will keep a keen eye on the progress as lower highs have formed. With around a 10% correction in the MSCI All Country World Index, which we believe was long overdue, we do not envision the markets heading into Bearish territory. Rather, this correction is a healthy washout of risk that should likely serve to refresh the existing Bull Market cycle, one in which there should be new opportunities to deploy capital into the potentially newer sector and asset class leaders. We would now look for the Global Stock Index to rise back above Cash and the spread between them to widen further to reveal a trigger for the new Mini Buy signal. If a stronger move happens, then we might have the conditions for a potential Confirmed Up signal.

 

The Tactical Indicators have shown more range bound price action this week. The 10-week now sits at 38%. We would like to see a move up past the previous X-column level of 44% to the 46% level. We are not going to predict that happening just yet, but we are encouraged by the rapid bounce from the Low Risk Levels back to Neutral. The Overbought/Oversold Indicator has now held about 2.7% below the Bull Trend Average with a bounce in the MSCI All Country World Index off the psychological support of 500, despite moving below earlier in the week. Since the slope of the channel is rising, if we were to hold these levels moving forward with continued sideways trading, we would achieve the Oversold condition. While the long-term trend is still positive, the short-term move from the all-time highs back down appears severe. We would prefer a stronger signal, but as of now, we are still holding some cash to wait out the continuing correction. Once the buying opportunity arises, we will act swiftly.

 

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2018-04-06T12:03:29+00:00 April 6th, 2018|Financial Advice|