Based on what we know today, the big picture remains positive for stocks. We anticipate adding to the risk portion of our portfolios in the coming days.
We are extremely pleased with the signals given by the CCM Market Risk Model over the past 13 weeks. The model raised yellow flags in early May, and told us to be open to a reversal as early as May 25, just prior to the market’s low in early June. The CCM Market Risk Model should prove to be a valuable asset for many years to come. Below is an excerpt from a May 25 Short Takes post (prior to the June 4 market bottom):
This article outlines numerous technical set-ups that tell us to be open to a rally in stocks…The possibility of debt-sharing or some form of compromise in Europe coupled with the numerous bullish set-ups necessitates an open mind relative to better than expected outcomes over the coming weeks and months.
On July 2, we noted the importance of a German shift relative to the European debt crisis:
Germany moved off their hard-line stance, which may mark a watershed moment for the financial markets, at least in the intermediate-term. Germany’s shift may have a similar impact on the markets to the Fed’s quantitative easing programs (QE) and the financial “TARP” thrown out during the 2008 crisis.
Numerous markets broke above resistance today. Daily RSI closed above 65; something we have been waiting for since early July. There is one more short-term hurdle in the form of weekly DeMark resistance at 1,415.