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The S&P 500 has risen above our bullish price target of 1837 and it is starting to look more and more like the recent decline was much ado about nothing. However, in the short term the market is looking overbought and is still due for some sort of selloff.
After breaking through its 100-day moving average and threatening the 200-day moving average, the S&P 500 is now firmly above both and closing in on new highs. It is now likely that we will at least test the highs on the S&P. If the test fails then it is likely the market will move back down and drift sideways. If the market is able to make new highs, then our price target on the S&P 500 is still 2350.
After a large spike the VIX has also calmed down and is now below its 100 and 200-day moving averages; it will probably test recent lows.
A slightly troubling sign: gold has been moving up strongly. However, so many factors impact gold prices it is impossible to judge whether this is a result of a flight to safety or something else. Two other factors that could negatively impact the economy going forward are that the yield on the 10-year Treasury has ticked up, and oil prices are starting to increase quite a bit.
Positioning and Recent Moves
We are buying back into some of our momentum models on the S&P 500 today.
Income Strategies: We are currently positioned for a flight to safety.
Trend Aggregation Strategies: Our momentum models are partially invested. Our countertrend strategies used recent strength to sell.
Momentum Strategies: Our equity models are partially invested.
Specialized Strategies: Our momentum models are partially invested while our countertrend models are fully in cash.