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Now that the debt ceiling issue is behind us and the economic numbers continue to show an economy that isn’t strong enough for the Fed to pull back we are back to nowhere else to put your money except for stocks. Unlike earlier in the year, international and emerging market stocks are now joining in the rally. You could argue that this is healthy as we would prefer to see a broad based vs. narrow stock rally. You could also argue that this is the sign of a top as investors are scouring the world looking for any value that is left.
Shorter term the futures point to an up market open. The market is overbought and due for some sort of selloff and the last days of the month and first day of the next typically are pretty volatile so we would expect some sort of large move one way or the other Thursday or Friday.
Positioning and Recent Moves
Income Strategies: Our Income Strategies are positioned for an uptrend in stocks and some select bond sectors.
Trend Aggregation Strategies: We are currently fully invested in our equity momentum models in accordance with the market trend. Our counter trend models are in cash waiting for market weakness. After the most recent rally the market is looking overbought so the cash may be put back to work shortly.
Momentum Strategies: Our Momentum Strategies are at their full equity allocations.
Specialized Strategies: Our momentum models are fully invested while our counter trend models are in cash waiting for market weakness.
We noticed something interesting the other day about the NASDAQ Index. On March 9,2000 the NASDAQ closed over the 5,000 mark for the first time ever. The NASDAQ ended with its 15th record close that year, up 150.22 points to 5,047.39. Its low was on October 9, 2002 at 1,114.11—a 3944 point range between high and low. Currently the NASDAQ is at 3952, a 71% retracement. Historically, once an index retraces more than 68% of a move, it ends up retracing 100% of the move in the future. That could mean the NASDAQ reaching 5000, perhaps by mid 2015.