The second quarter has come and gone it was not a pretty sight by most standards. We might sound like a broken record at this point but we haven’t seen any signs of things changing. We still believe we are about 2/3 the way through a secular bear market that began in 2000 and will most likely continue until 2014 – 2016. This doesn’t mean the market will go down for the next few years, although it could, but we’ll probably see 2 steps forward, two steps back movement with possibly a downward bias.
We did see some indicators turn positive in mid-June so we upped our equity allocation. We didn't "feel" like that was going to be a winning move: too many dark clouds were overhead. But we follow our indicators as they have us on the right side more often than not. And when they are wrong, they reverse back relatively quickly. This was one of those times as last week our two shorter term indicators turned back to negative, and we adjusted accordingly by reducing our equity positions.
Another interesting development is the possibility of the so-called “Dark Cross” in the market. The dark cross is when the 50 day Moving Average crosses below the 200 day Moving Average. Even more concerning is that when the 200 day MA is trending down. The last time this happened was in December 2007, shortly before the crash of 2008. The S&P 500 has its 50 day MA right at its 200 day MA and the 200 day is just beginning to turn down so it will be intereting to watch how that plays out.
Needless to say, we are not positive for the equity markets right now. We would be considering the iShares Barclays Aggregate Bond Index (AGG) and would be avoiding the SPDRs (SPY) but you could really subsitite most equity index ETFs in the avoid category.
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