Major market tops are drawn-out processes that can prove costly, and infuriating, to bulls and bears alike. Younger readers might be surprised to know that was true before Twitter.
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.
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).
Transportation stocks have confounded conventional wisdom about their presumed relationship with oil during the past three years.
We’ve frequently mentioned the two-faced nature of thematic leadership during the current bull market. Filtering out the minor swings, Phase One lasted from March 2009 through February 2011 and was dominated by low quality, high beta and cyclical stocks.