
Over the past week most of our measures of market health fell. Measures of trend rose and perceptions of risk abated a bit. The market is trying to bounce, but isn’t showing the type of strength usually associated with a short term low. While underlying internals are deteriorating, price for the S&P 500 Index (SPX) is painting a pattern that often marks the halfway point in a short term decline. The pattern is still short in duration and will require a break below 1770 on SPX to increase the probability of a continued decline. A few closes above about the 1820 level would negate the pattern and suggest the market will rally higher. Our measures of the economy, market quality, and strength all fell sharply. Our measures of strength fell far enough that we’re raising some cash in the long/cash portfolios and adding a larger hedge to the hedged portfolio. The long/cash portfolios are now 60% long and 40% cash. The hedged portfolio is now 80% long stocks that we