Since the start of this rally in December market declines have been rare and limited to just three days of selling. Thus, I’m looking for the markets to regain their footing or we must consider a potential change in trend.
There are several issues to keep in the radar including debt worries in Spain and a further slow down in China. No doubt there will be a market correction at some point and even if 2012 turns out to be a terrific year there are always potholes along the way. Yesterday I spent a few hours sifting through data of how our model reacted in 2004. The back test data showed a terrific return by any measure but there were also two pullbacks in the range of 10%.
At this point in time only Investor Sentiment measures are in the warning zone, all trading and momentum models remain bullish. For the time being we remain fully invested.