Rally Back, Still Going Nowhere

Despite the fact that we remain on a “sell” signal, and technically should be carrying a partially underweight position in equities, the markets have done nothing “wrong” at this point. While the markets broke down last week raising some concerns, it was quickly reversed this past week as market participants bid stocks back up. A large inflow of liquidity from the Federal Reserve was responsible for the sizable reversal last week.

If the markets can breakout above 1880 to new highs, and reverse the current sell signal in the next week, then the bull market trend will remain intact and we will allocate portfolios accordingly. However, support for the Federal Reserve will fall rather sharply over the next couple of weeks creating a bit of void for the markets. Therefore, we will remain cautious for the moment and watch to see what unfolds.