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Technically Speaking: The Bear Market Is Over... For Now

Over the last couple of weeks, in both the daily blog and weekly newsletter, I have been laying out the technical case for a breakout above the downtrend. Such a breakout would demand a subsequent increase in equity risk in portfolios. To wit:

"As I stated last week, the markets have currently registered a very short-term buy signal which dictates that we must consider increasing equity risk in portfolios. I would be remiss in not paying attention that signal, but such signals can be a "false flag" during a larger market topping process.

The markets must break above the current downtrend line in order to increase allocations in portfolios. I have already positioned model portfolios to increase exposure back to 50% should such an event occur."

I have updated the chart below through today's open.

The breakout above the downtrend resistance suggests a moderate increase in equity exposure is warranted. The breakout also suggests that the markets will now try to advance back to old highs from last year. However, let me repeat the warning from last week:


Let me be VERY CLEAR - this is VERY SHORT-TERM analysis. From a TRADING perspective, there is a tradable opportunity being developed. This DOES NOT mean the markets are about to begin the next great secular bull market. Caution is highly advised if you are the type of person who doesn't pay close attention to your portfolio or have an inherent disposition to "hoping things will get back to even" if things go wrong rather than selling."

Holding My Nose

With the breakout of the market yesterday, and given that "short-term buy signals" are in place, I began adding exposure back into portfolios. This is probably the most difficult "buy" I can ever remember making.

First, as a recap, it is worth remembering that I have been at 50% or less exposure in portfolios since May...