Last week, I stated the market was approaching a fairly important decision point. To wit:
"As shown in the chart below, the market has been remained trapped in a tightening pattern of higher lows and lower highers. This type of action is like the compression of spring. In the next few days, the markets will make an important decision. A breakout to the upside of this consolidation will confirm the current bullish trend, and portfolio actions should remain allocated and tilted more heavily towards equity related risk. However, a break to the downside will likely suggest a more significant correction in the near term. It is worth noting that this consolidation in the market is happening during a decline of relative strength. This is a warning sign that generally bodes poorly for the bulls."
(Note: The chart has been updated to Friday's close to show the breakout of that consolidation.)
"Since portfolios are currently fully allocated to the market, if the market breaks out to the upside of the current consolidation this will simply confirm that the"bulls" are still currently in charge of the market. No action will be required."
As shown, that breakout did occur this past Friday,which suggests that the bullish trend is still intact and that portfolios should remain currently tilted towards equity exposure.
However, this does NOT mean that all market risk is now resolved, or that investors should return to their complacent slumber.
As discussed in this past weekend's missive the market is currently more overbought now that at any other point in history going back to 1940..."