(11:30am update) Our Current Market Outlook has changed to “Market in Correction” and our light is now “red“. The stock markets uptrend has slipped into a correction. With last nights fourth consecutive close under the 50 day moving average by the Nasdaq and the S&P500, and this mornings “fears of global economic slowing” sharp sell-off on top of an already weak technical backdrop (mentioned yesterday), our official signal is now downgraded to a “red” light.
Investors and traders must understand that in a news/headline driven market volatility increases and risks rise, for both bulls & bears. The likelihood of a positive Presidential tweet or a small Chinese concession regarding the trade war in the near term is high. Such a development would send the market sharply higher almost immediately. According to Investors Business Daily, the current rally attempt, which is not dead yet and is on day 8, could still lead to a follow-through day and cause an upgrade in our outlook. In order for the rally attempt to continue, the S&P500 must stay above 2801.43. Otherwise, lower is likely.
The stock markets underlying technical conditions are weak. Conversely, the bond markets internals are strong and seem to be sending a message that a recession is nigh. Time will be needed for this situation to work itself out. While no one knows how long a correction will last or how far it will decline, employing defensive measures to protect your wealth by taking some profits and selling losers is prudent. Our average cash & short-term securities levels in our 5 strategies are currently 43, 48, 60, 65 & 100%.
The mathematical internal indicators of our proprietary 3-stage sell-signal discipline have once again done their job. Will this sell-off end soon and prove to be the “higher low” on the charts that we have been watching for? Or will the old adage “sell in May & go away” prove its merit and precede a significant decline into autumn? Only time will tell. Either way we will continue to study the math of the market daily and be prepared. Stay buckled up!
Have a Triumphant day! ®