Starting to Deploy Assets

Just a quick note on our tactical trading view. We have been waiting for a follow-through thrust in the market. It’s our opinion that yesterday could have been that catalysts. We have started to deploy assets in preparation for market strength into the end of the year. We’ve deployed about 50% of what we anticipate and will deploy additional assets should we see the recent gains hold and market leadership transition to growth sectors.

The S&P 500 has rallied back above the 200-day SMA and has broke through the latest Fibonacci resistance level. We’ve also retaken the longer-term trend line. We find the bullish divergence between the index and the RSI encouraging. The bullish MACD cross on volume and thrust has enticed us to partially move back into the market. Once the MACD histogram turns lower and starts to recover and assuming these technical levels hold, we’ll deploy additional assets and have greater faith in the year-end rally. A key test for the S&P 500 is near the 50-day SMA of 2830.

The same can be said for the NASDAQ. A key test for the NASDAQ will be 7700 near the 50-day SMA. The Russell 2000 hasn’t recovered as nicely as the other two indices and is something worth watching. Small-cap participation into the year-end would be an encouraging development.

Sector Leadership

Defensive sectors have been dominant over the past several weeks.

Over the past several weeks, utilities, staples and health care have been the leading sectors. This isn’t what we want to see in place for a healthy rally.

A sustained rally needs the participation of the financial and technology sector. We’re seeing progress made within the financial sector relative to the S&P 500.

Technology has formed a topping process relative to the S&P 500.

Over the past few days, we’re encouraged that financial and consumer discretionary are leaders during the recovery. We are waiting for the technology sector to participate.

We have started to deploy capital and believe a year-end rally is possible. If our technical criteria and sector leadership requirements are met, we will get even more aggressive into the end of the year.

Joseph S. Kalinowski, CFA