All four of the short-term indicators that I use to track the market have now moved down. The fourth indicator to finally capitulate and reverse down was the high low index, which occurred in just the last few days. This means that more new low’s are being set in the market then new highs.
This indicator by itself should tell you that money is starting to move out of the market.
The short-term indicators are just that — signs of what’s happening on a daily basis in the market. It means that the market may struggle — or possibly move down — in the very near term. It does not mean that the market must crash, but it may mean that the market may not go anywhere in the very near term.
There is something else you should keep in mind: the short term moves in the market can, and often do, become longer term moves. So, said another way, the short-term often can turn into the long term.
As I wrote in a previous post, there are clients holding more cash on the sidelines then they really prefer to hold. While this has been difficult with the market moving up, this may ultimately turn out to be the right move. And this short term phase that we’re in may turn out to be the opportunity we need to get back into this market — or the sign of some bigger move down.
In any event, we will continue to monitor market conditions — and the risk levels in the marketplace (which are still unusually high) and keep you posted when the time is right to put more money to work.