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The Market on Tenterhooks

By now we have all heard the news. Some data providers announced that the 50 day and 200 day moving averages on the SP500 have, at long last, converged. This follows comparable developments in broad equities markets overseas, and with respect to the NASDAQ last week. We all ought to be rubbing our hands together, no?

Not so fast. Moving crossovers are nifty, sure, but, there's a catch: Follow through. Before you take off your "defend capital" hat and put on the "maximize returns" cap instead, you really want to see markets demonstrate that a new technical trend is in place with some meaningful price movement higher.  As yet, we've seen anything but. And yes, while the news is rather chipper as analysts discuss the fact that most broad US equities indexes are now quite a bit higher than their 200 day simple moving averages, the same cannot be said of the 200 day exponential moving averages. In fact, many indexes, such as the Dow Jones Industrial Average and the Standard and Poors 500 have stalled at the 200 day exponential moving average and have since sold off. This just looks like garden variety technical resistance at a resistance point that, frankly, marks the outter boundaries of a bear market. By that measure, we're still comfortably in technical bear market territory.

The next few days or weeks will be rather illuminating. To be sure, you'd expect that after slicing through technical resistance at the 200 day simple moving averages, traders might want to scope these areas out as technical support, as opposed to resistance. Maybe that is what we are seeing now?  Only time will tell. And then there's the little matter of all those foreign equities markets, some of which are firmly in bull market territory from a technical perspective. Aberrations? Outliers? Again, only time will tell. And for a certainty, it will.

For my part, I am still holding most of my international ETFs, and some domestic equities as well because currently, the case for a new bull market appears stronger than the case for a bear market rally.  But that's only with about 51% certainty, based on technical measures that are somewhat broader than what you might read on the front page of CNBC.  I'm poised to sell if those odds invert.