The major indexes have recovered most of the losses from last weeks harsh sell-off, but on uninspiring volume to this point and as such remain under pressure. Last weeks rare, early “1st stage sell-signal” is still in effect, however, in as few as two more days of bullish action it could be negated and end up as a false signal. Our research shows that this particular technical event has a strong history of accuracy (high 80’s %), but is not perfect and can be early. The other “2nd stage sell-signal” from last week (an important support level violation on the S&P 500) has moved back up to a mildly positive position and as a result has brought one of our 7 strategies back to a fully invested position. The inverse ETF (short S&P) positions initiated last week as a hedge in two of our other strategies were exited with very mild losses yesterday (05/22).
It would be an understatement to say that the market is at an important crossroad now. However, while risk is elevated and cross-currents abound, the level of professional selling (Distribution Days) in the past 5 weeks remains low & manageable. While we are officially in a defensive posture and have signaled a “red” light, we know that the market gets the last word and we remain open-minded to any sudden change that could spark a resumption to the Trump rally. In our 7 different strategies we have various levels of market exposure currently and we remain prepared to either increase or decrease those levels based on the markets action in the days just ahead.
Rest assured we are working diligently to manage assets wisely and to react prudently as risks in the markets increase to achieve our dual mandate for our clients.
Have a Triumphant day!