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October Monthly Review: Pull Back Awaits

The markets rallied strongly in October, as bears loosened their grip. Our intermediate-term trend-following models suggest the markets need just a bit more work to switch to risk-on mode. We review the US, international and futures markets in great detail here. The 2015 SPX prices show a very high correlation to 2011 prices (see figure below), which suggests a pull back is likely, even as fundamentals have improved with Congressional action on the debt-limit and a $80 billion stimulus in the budget targets.

Via SPX Chart showing 2015 vs 2011 price action