The S&P 500 is in a clear downtrend. There's no one denying that, and it's been painful for most investors this year. With so much cash parked on the sidelines, we are watching the technical levels very closely to determine when and where to begin redeploying the arsenal of cash reserves we hold. Although the market will have significant resistance and there's a good chance that we have not yet seen the "final" bottom yet, time will tell. But at some point, one of these 'bear market rallies' will stick, and will happen when investors simply don't believe. We are identifying pockets of stocks and sectors that seem to be recovering a bit more constructively, and are actively pursuing these opportunities in limited quantities. However, given that, the market is consolidating below key resistance. Therefore our cash positions will remain elevated until we see some significant technical improvement.
The S&P 500, as illustrated in the chart below, needs to break back above both the blue downtrend channel line, as well as the red resistance line in order to feel comfortable that a rally, if only short-term, is in effect.
- The market is consolidating, possibly found a near-term bottom (for now), but has much work to do to improve the technical damage inflicted on it this year.
- Down-trend remains in full-effect - lower highs, lower lows.
- Resistance levels will continue to provide for a choppy market in the short to mid term.