Defensive Stance Still Warranted (Update)
Today, we have reports on durable goods at 8:30 am and new home sales at 10:00 am. GDP is released at 8:30 am on Friday. Tuesday’s existing home sales came in below expectations and below even the lowest estimate.
The CCM Bull Market Sustainability Index (BMSI) closed yesterday at 398. We may be getting closer to some type of bounce or intermediate-term bottom, but the chart of the S&P 500 still looks weak. We do not have positive divergences that you would like to see as markets approach recent lows, which means further weakness in the short-term would not be surprising.
An updated version of the chart we posted before Tuesday’s open is shown below. It is still reasonable to assume the S&P 500 may attract some buyers between 1,010 and 1,040, but we would like to see some better set-ups on the charts (something we do not have yet).
In terms of strategy, we will see how markets behave between 1,010 and 1,040 and adjust as needed. We are comfortable with our ratio of risk-to-conservative investments. We remain open to becoming more defensive if needed. Weak economic data could still impact markets in a negative manner.
