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Bouncing Around

My core market health indicators are bouncing around as the market consolidates in a sideways pattern. This is healthy behavior and should resolve with another leg upward.

 
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Jump in Market Health

Last week, I said that we’ve got everything we need for the next leg of this bull market. This week we’re getting confirmation of the rally with all of my core market health indicators jumping substantially. Some of them are starting to get into overbought territory, but when this happens it often fuels the rally for several weeks before it ends. Enjoy the ride.

 
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This Should Be It

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.   Conclusion It looks

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Get Ready For A Breakout

Last week, I said you should get ready for a rally. This week my core market health indicators are telling us to get ready for a breakout above 2500 on the S&P 500 Index (SPX). Most of them improved and various measures of breath also improved. One breadth indicator that I’m watching closely is the percent of SPX stocks that are above their 200 day moving average. There are still about 32% of these stocks below their 200 dma. If SPX breaks above 2500 I expect this measure to rise quickly as money managers look for value as the market rallies.  

 
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Get Ready

Over the past two weeks, my market health indicators have bounced around a bit and while doing it have been compressing near the zero line. When this happens, an strong move often follows. At the moment, the odds favor the bulls. Get ready for a rally.

 
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Weakness Without Much Fear

Over the past week, most of my core market health indicators fell. Most notably, my measures of market strength went negative. This changes the core portfolio allocations (below). Another thing that was interesting this week is that the fear everyone is talking about isn’t showing up in my Market Risk Indicator yet. The most sensitive components of that indicator think the saber rattling this week is a non-event event. That’s not to say a negative risk reaction won’t materialize, but until it does we have to operate under the assumption that this event will quickly fade as a market moving issue. The new portfolio allocations are as follows: Long / Short Hedged portfolio: 90% long high beta stocks and 10% short the S&P 500 Index (or use the ETF with symbol SH) Long / Cash portfolio: 80% long and 20% cash Volatility Hedged portfolio: 100% long (Since 11/11/2016) One thing you can keep an eye on is the bullish percent index (BPSPX). It is still a good distance above my

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Still Positive

Over the past week, my core market health indicators bounced around, but all still held positive readings. I expect we’ll continue to see some chop, but it should resolve higher.

 
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Here We Go

Over the past week, all of my core market health indicators rose. As I suspected, we’re getting new highs and not a long term top… just yet.

 
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Trying to Break Higher

Over the past week, my core market health indicators mostly moved higher. With the exception of market risk, they’re compressing around the zero line. This usually happens near inflection points where the market breaks hard one way or the other. Market risk isn’t showing up so that gives the edge to the bulls. The current dip looks much more like a rotation before a rally than a long term top being made.   My measures of market trend moved into positive territory this week. As a result, the portfolio allocations have changed as noted below. As always, use your own risk tolerance to structure your portfolio. Long / Cash portfolio: 40% long and 60% cash Long / Short portfolio: 70% long high beta stocks and 30% short the S&P 500 Index (or use the ETF with symbol SH) Volatility Hedged portfolio: 100% long (since 11/11/2016)  

 
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Almost Ready

Over the past week, most of my core market health indicators rose. Most significantly, are the market quality and trend categories. Both of them could go positive next week if the market doesn’t suffer much damage.   One fly in the ointment is that money is still being moved disproportionately into mega cap stocks. This will provide a headwind for the broad market until the ratio between the S&P 500 Index (SPX) and SPX Equal Weighted (SPXEW) can move higher (preferably above its 20 week moving average).   Conclusion Market health is improving, but investors are still favoring the “safe” stocks. This indicates continued marginal gains followed by choppiness.

 
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