Bellwethers
Everything’s Great, And Everyone Knows It
The “Biden Bump” brushed away any lingering technical deficiencies in the stock market, but that happy state of affairs is reflected in extremely frothy-looking short-term sentiment indictors. We are riding the momentum to some extent, but with a lower base-level of exposure.
Stock Market Observations
Throughout the spring and summer, the market could alternatively be characterized as “divergent” or “disjointed”—but until very recently it could not be considered “distributive.” Now, Mid and Small Caps have hit a short-term air pocket and breadth figures were exceptionally poor at September’s scattered highs in the DJIA and S&P 500.
“Don’t Just Do Something, Stand There!”
Inaction has been a richly rewarded trait throughout the current bull market, and especially in 2017.
“Top In” Or “Topping Out?”
The stock market rally has carried far enough to flip some of our trend-following work bullish, lifting the Major Trend Index to a low-neutral reading. The improvement prompted an increase in asset allocation portfolios’ net equity exposure to 42% (up from 36% previously).
No Time For The Hamptons
We’ve lived through many other low-volatility market rallies, but until the last couple of months we hadn’t experienced one in which clients, colleagues, and commentators were complaining so loudly of boredom.
A Quick Technical Take
If a bear market is imminent, it will unfold with less “internal” forewarning than any cyclical decline since the late 1930s.