We are still early in the second leg of what we think could be a potentially sustained Bull market. This week, there was little action in stocks both in the US and abroad, but volatility has seemingly fallen. There could be choppier trading, depending on how the midterm election year trends and 6-month seasonality effects play out this year. We are not seeing a huge separation between the Global Stock Index and Cash, and their relative rank is close. We would like to see more asset classes rise above Cash, but at this point, we are in a very neutral position. Our Confirmed Up signal will be 10 business days old at the end of the week.
The Tactical Indicators remain Neutral. The 10-week moved up to the 62% level, continuing the progress from April into May. A little push could move the chart to the High Risk level, but with the historically seasonally weaker 6-month period underway, we could see a reversal, meaning that more stocks in the universe would fall below their 10-week average prices. It is difficult to predict a direction from these points, so we will not venture to do so. The Overbought/Oversold Indicator is about 2.3% below the Bull Trend Average, and we continue to trade sideways between the Average and the Oversold level. It is curious to note that the 500-support level in the MSCI All Country World Index will soon meet the Oversold level. The risk that we have now with being partially invested is missing opportunities if the market runs away. However, should another correction take place, which may happen due to the seasonality effect, we would look to put more of the Cash that we have freed up to work.
We review the rationale for holding more cash during the weaker 6-month season historically and during this time in the US election cycle, especially the trends in midterm election years. 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.