Cautiously Long!

Today’s trading activity is a little light in terms of volume but higher nonetheless. All the major indices are continuing their bullish ascent with the exception of the Russell 2000 as small caps don’t seem to want to participate.

One item we wanted to point out is the percent of companies in the S&P 500 trading above their 50 day moving average. As of the close yesterday, a whopping 93.4% or 467 companies in the S&P 500 have reached this particular milestone.

Looking back over the past four years, when the market is in a strong bull cycle and the stock participation rate is this strong, the market has gone on to tack on further gains. It’s when the market is running and there is a negative divergence of the participation rate is when the red flags go up!

We have positioned ourselves on the right side of the trade but will continue to look for signs of weakness. Perhaps a weak report by Apple tonight may be the catalyst that stops this run.

Bottom Line: We continue to be long in our portfolio in the hopes of letting our winners run but will be quick to move out of the way at the earliest signs of trouble.

Joseph S. Kalinowski, CFA