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That Was Quick

Last week we got a market risk warning due to the surprise of the Brexit vote. This week, that warning has been cleared as market participants realize it will take a couple of years to sort out… so they can wait until then to panic. 😉 My core market health indicators, with the exception of trend, improved last week.

160701MarketHealth

The overall numbers are still soft, but positive enough to change the portfolio allocations to the following.

Volatility Hedged portfolio: 100% long

Long / Short Hedged portfolio: 80% long high beta stocks and 20% short the S&P 500 Index (or the ETF SH)

Long / Cash portfolio: 60% long and 40% cash

One thing of note that happened over the past few weeks is the Dow Jones Transportation Average (DJTA) created a new secondary high near 8110. The Dow Jones Industrial Average (DJIA) also created a new secondary high near 18100. DJIA is above November 2015 secondary high, but DJTA is below all of its recent secondary highs. As a result, Dow Theory is still signalling that we’re in the midst of a long term down trend (but with a bullish non-confirmation). To signal that the bear market is over DJTA needs to move above roughly 8110.

160701DowTheory

 
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