Last week was another significant week, insofar as spread damage to the equity market was extensive but not yet terminal. The Speedometer score fell into negative territory for the first time in 2 years, indicating that a potential significant shift in asset allocation is taking place.
Both the Daily and Weekly models are in Risk Off (invested in bonds), while the Counter-Trend Models are long, keeping us in equities for a little longer, looking for a bounce. But they too will sell soon, giving us pure risk off. And month-end is coming: it will be very interesting to see if the Monthly Model gives a sell signal. It probably will! That could be the nail in the coffin of the equity bull market since 2009.
Individual shares have been pummeled and some very bad damage has been done to a variety of leading shares that have been flying high. I encourage you to work with the Database to see if your portfolio needs to be changed in composition.
Overall our posture is much more defensive: some aggressive growth stocks have been sold and replaced with more defensive Consumer Staples, which are relatively cheap. But our overall allocation to equities is still unchanged at 80%, while the Counter-trend models are in buy mode. This will end soon and the market will then be in very great peril, contrary to everyone’s expectations of a year-end rally.
A video of my expectations for the near term can be viewed at HERE.