Over the past week, my core market health indicators mostly improved. Most significant is that my measures of market strength have now moved above zero. This changes the core portfolio allocations as follows:
Long / Cash portfolio: 100% long
Long / Short portfolio: 100% long high beta stocks
Volatility Hedged portfolio: 100% long since 11/11/2016
Another thing of note is that we’ve been seeing broad based buying of the stocks in the S&P 500 Index (SPX) again. If the ratio between the SPX Equal Weighted Index (SPXEW) and SPX can get back above its 20 week moving average it will be a very healthy sign. Since the first of the year, investors have favored mega cap stocks. We want to see the smaller stocks in SPX rallying faster than the mega caps as it will indicate broad based buying and increased tolerance for risk. Add to that, SPX looks like it’s now got a clear break above 2500 and we’ve got the recipe for a rally.
It looks like we’ve got everything we need for the next leg of this bull market. All of my core indicators are positive, wide spread buying has returned, and SPX has a clean break above 2500. Enjoy the ride.