Our core market health indicators moved slightly higher this week even though the market fell. This signals that the current correction is most likely healthy, rather than the start of a long term down trend. The only fly in the ointment is our market risk indicator. It signaled intra-day a couple of times this week, but it doesn’t appear that it will close the week on a warning signal.
Bottom line we still have a battle brewing between rising perception of risk (bearish) against healthy underlying conditions in the market. This battle is occurring while the market is right next to an important support/resistance level. At the time of this writing (3:30 Eastern) the S&P 500 Index (SPX) is rallying into the close and is at about 1597. We’d like to see it close the day above 1600 as that is one of our major support levels generated from the Twitter stream.
Our portfolios will remain with the same allocations since we didn’t get a signal from market risk (or from any core indicators). Next week will either confirm a resumption of the uptrend or likely generate a warning signal.
Below is a chart of the status of our core indicators.