Over the last few days the various equity market indices have continued into new high territory.  That said, our four key tactical indicators continue to suggest waiting for a 2-5% pullback before adding increased equity market exposure.  Despite the record high yesterday in the S&P 500 (SPX), only 55% – just over half – of the SPX were trading above their respective 10-day moving averages.  That coupled with the overbought level of our other four key tactical indicators reinforce our conviction of a brief correction directly ahead.

 

The pushback I am getting is that a 2-5% correction is so small so why bother worrying about it.  The reason we do highlight small corrections when our indicators suggest them is that corrections only seem small until they actually happen.  We often say that corrections only seem “natural, normal, and healthy” until you get one, then it feels like something so much worse is about to happen.  We simply want to remain patient and be ready to take advantage of a drop that others will sell into.

 

Past performance is not a guarantee of future results. Index returns are unmanaged and do not reflect the deduction of any fees or expenses.

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