It doesn’t pay to be smarter than the market. Our core market health indicators mostly improved this past week, however everything but risk remains deep in negative territory. Our measures of the economy continue to slip lower as economic reports from around the world bring disappointment. Our measures of trend slipped as well, however this is mostly due to the market stalling over the past month so we expect improvement if the S&P 500 Index (SPX) can stay above 1550 and ultimately break above 1600. Our measures of risk, quality, and strength all improved as the market showed resilience in the face of bad news. That’s probably the most important observation we make this week. There is virtually no perceived risk. I use the word “perceived” because we see plenty of risk. But if there is one thing I’ve learned over my life is that it doesn’t pay to be smarter than the market. As a result, our hedged portfolio remains modestly long and won’t be aggressively hedged unless
