The State of the Markets:
Since we are deep into summer vacation season, I'm going to keep things brief this morning and let the indicators do most of the talking.
My take on the current market action is the consolidation phase remains intact. Yes, the market has been moving cautiously higher since April. But as I've mentioned recently, there hasn't been and zest behind the move.
Remember, when stocks blast higher with some "oomph," something called a "breadth thrust" occurs. This is where advancing issues, demand volume, the number of technically healthy stocks, and/or new highs swamp their counterparts. The great thing about a surge in breadth is history shows it portends good things to come over the ensuing 3, 6, 9, and 12-month periods. But so far at least, these indicators have not flashed a fresh batch of buy signals.
In reviewing the indicator boards this morning, I feel the "state of the market" is summed up nicely by the groups of indicators/models presented. For starters, the Primary Cycle board isn't bad, but it isn't great either and the historical average return of the S&P 500 given the current readings of the models is well below average at 3.6% vs. 8.9%. The Trend board suggests the bulls have the ball. As I've been saying, the Momentum board is positive, but not robust. The Early Warning board tells us that stocks are overbought, and sentiment is becoming a bit overdone. And then, the External Factors board makes it clear that there are fundamental issues to be concerned with.
So, as a risk manager, I have to say that some caution is warranted here. To be clear, the state of the indicators doesn't mean that a bear market is imminent ...