Positioning.

So far this week we have tried to lay out both the positive and negative case for equities as we head into the fall.  What I hope has been shown is that we are currently in a data environment where for every bad headline you can point equally to something that is a positive.   Fundamentals can be construed as supportive and valuation parameters are not stretched.   Never-the-less I think that stock prices are vulnerable to a short term correction.  I will try to lay out my concerns and explain what we have done in client portfolios.

Let's get this out first.  I have no idea where the markets are headed in any time frame.  Here at Lumen Capital Management, LLC we use a weight of the evidence approach that applies probabilities to different market scenarios.  These scenarios and strategies come from our playbook.  The playbook is situational analysis based on historical market results.  We study money flows along with the disciplines of fundamental and valuation analysis to see how markets have responded to similar historical events. It gives us different scenarios regarding market activity. We use it to formulate our game plan. The game plan is a tactical and a strategic allocation of assets based on what the playbook tells us has historically occurred. It is then further refined to the specific risk/reward parameters of our clients.  Here then is what we are seeing.

Markets are tuned into Federal Reserve Chairman Ben Bernanke's speech at an economic symposium tomorrow at Jackson Hole, Wyoming.  It is from this perch a few years ago that Bernanke launched the first round of quantitative easing of fiscal policy and stock markets rallied.  There is hope that he might launch a similar policy tomorrow.  While I think most market participants have by this point discounted what he will say, I believe the speech will more likely set the tone of the economic debate for the rest of the year than actually provide any concrete measures tomorrow.  What I mean by that is that any indication from Bernanke that the Fed is on the sidelines and will likely not do much till the end of the year could set a negative tone for investors.   An indication on his part for example that the Federal Reserve is ready to immediately step in on any further signs of economic weakness would likely set a more positive tone going forward.   I think on balance that Bernanke's speech will be more negative than market participants currently want and that could get us started off on the wrong foot when the world returns from summer next Tuesday.

Investors are more complacent right now than they were a few months ago, we can see this in investor sentiment numbers.  Stocks are also overbought in almost every time frame we follow.  The percentage of stocks trading above their 50 and 200 day moving averages has entered over bought territory that has often signaled a correction.  On top of this we are now in the middle of statistically the worst seasonal period of the year.  September is the worst trading month and the late August to mid-October period in most years brings up heightened trading volatility and often a correction of some sort.  Finally there is the election.  While I think the markets as a whole are agnostic about who wins in the long run, the next few months have the potential to be unsettling for investors.  This is particularly true if the election remains tight.  

As we mentioned yesterday stocks are not expensive on a valuation basis but they are not as cheap as they were back in the early summer.  On top of that one has to factor in the nearly 10% rise in prices off of the June lows and we should expect that there will be some investors anxious to lock in profits.

In general we have been pretty fully invested for most clients until recently.  The definition of fully invested for us of course varies among our investment strategies, is tailored to our individual client's investment criteria and is dependent on how long we've had client assets.  For example some of our  new clients who have come on board in the last six months have not been fully invested as the timing of when we received their assets and market conditions did not warrant so far that kind of posturing.  On the other side of that coin some of our accounts in some of our more aggressive strategies spent most of the summer with cash positions under 5%.  

In the past several weeks, reflecting rising market conditions and these concerns, we have raised our cash positions so now all things being equal we have between 10-15% cash in most client accounts.  Again that is a general statement and subject to what we said in the previous paragraph.  To reflect what we have been doing, we lowered both our short and intermediate indicators down one notch to NET MARKET NEUTRAL back on August 8th, 2012.  You can go here for a definition of that term.   We have the defensive pages of the playbook handy and stand prepared to implement them should market conditions warrant.

I will summarize our thinking this way.  So far 2012 has been a pretty good year for investors.  The market is showing classic symptoms of being tired.  I have no idea whether that means stocks will go up or down in the near future but the weight of the evidence is suggestive of a market that could have a correction ahead of it.  In my mind therefore it is prudent to raise some cash and to be prepared to raise more should the need arise.  If markets zoom higher from here then we will still be along for the ride.   If we do get that corrective phase then hopefully we will have some cash to redeploy at more attractive prices and the position should help blunt any move lower.

In any event, the next few months promise to be a bit more interesting that what we've seen over the summer.  Strap on those seat belts because it could be a bit more of a bumpy ride in the next few months.

*Long ETFs related to the S&P 500 in client and personal accounts.  

Current Fundamentals and Valuation

Fall may bring a renewed focus on the headwinds that we discussed yesterday but these must be balanced against certain other factors that have the potential to affect markets in a positive manner.  One of the first things to note is that all of the factors we listed yesterday are widely known to investors and therefore have probably largely been discounted by the markets unless they become appreciably worse in the next few months.  

Let us first take note that above everything else the economy is growing.  It may be growing in fits and spurts.  Its growth may be anemic and below historic norms, but it is growing.  GDP for the 2nd quarter was revised up today from 1.5 to 1.7% today.  Now again this upward revision is nothing that should make us want to throw a party.  However it beats economic contraction and may point the way for continued expansion in the months ahead.

Second while investors will increasingly focus on the election {which we noted yesterday has the potential to be a short term negative influence} from a practical aspect market participants on an economic basis probably don't care whether President Obama or Mitt Romney wins in November.  That's because regardless of who wins neither will completely control the either the House or the Senate.  Therefore expect either compromise next winter on some of our economic issues or more gridlock.  Either way markets will adjust accordingly regardless of who the occupant is at 1600 Pennsylvania Avenue.

Corporate balance sheets remain in excellent condition.  Profit margins remain high.  Interest rates are still near historic lows.  Under the hood economic innovation has continued albeit often in industries or products that don't necessarily show up every morning on the news.  Consumers continue to repair their own personal balance sheets and housing is starting to show just the faintest hint of a recovery.

On a valuation basis stocks are not as cheap today as they were back on June 19th, 2012 when I noted "NEVER IN MY INVESTMENT CAREER {now spanning over a quarter of a century} HAVE I SEEN STOCK VALUATIONS THIS CHEAP BASED ON HISTORIC PE LEVELS  AND ABSENT A RECESSION OR A SIGNIFICANT ECONOMIC CONTRACTION!!!!  Either we are going to have an event that provides a significant hit to growth or stocks are presenting a buying opportunity of a generation for longer term investors."  

Stocks have advanced about 6% since then and are nearly 10% higher since their early June lows.  The yield on the S&P 500 is still just a bit under 2% compared to a two year treasury yielding 1.65%.  Based on our 103.75 end of year S&P 500 earnings estimate {an estimate that is much closer to consensus today than it was about three months ago}, stocks carry a 13.6 PE and an earnings yield of 7.3%.  These are still attractive valuation principles based on what we currently know. 

Having said that, stocks are nearing the lower end of what I think is a likely valuation cone between 1450 and 1525 for the rest of 2012.  We'll talk a bit more about that and what we have been doing for clients tomorrow.

*Long ETFs related to the S&P 500 in client and personal accounts.

Headwinds

Summer now begins its long decline.  The world will after this week kick the sand out of its sandals and come back to confront the problems that everybody has known about all summer but has either put off or tried to ignore while folks are at the beach, cruising on a lake or just hanging out at home.  Here is just a sample of what faces us this fall.

Europe's debt problem will enter a new phase with elections in the Netherlands, Germany's Constitutional Court's ruling on the legality of the Eurozone bailout fund on September 12th, Greece doing everything in can to pry more money out of the EU while avoiding paying back what it owes as well as continued economic problems in Italy and Spain which will probably send them hat in hand to the ECB.

China's economy is a mess and is in a slowdown of its own.  China's economic numbers are notoriously unreliable so the situation there is probably worse than we can currently see.

An explosion and subsequent fire one of Venezuela's major refineries is likely to put upward pressure on US energy prices this fall.  Potential refinery disruptions from hurricane Isaac could also add to the problems depending on the severity of the storm.

In the US the markets will begin to focus on the so called "fiscal cliff", the popular shorthand term used to describe the choices the Government will face after the election regarding fiscal policy and tax increases into 2013, specifically the scheduled ending of the Bush tax cuts and certain draconian budget cuts.  It is estimated that if these measures were enacted in full that the economy could face a recession  next year.  Unemployment remains stubbornly high and will likely be a major factor in the Presidential debates and the elections this fall.  I think that the major trump card Republican nominee Romney has will be when he looks into the camera at some point and asks the American people are they better off today than they were four years ago.  For most people the answer will be no.  The election is shaping up to be close and has the potential to have a similar outcome to the 2000 race that wasn't decided until after the Supreme Court ruled in the case of Bush v. Gore on December 12th.  In case you were wondering, the stock market lost about 8% between the election in 2000 and the Supreme Court's ruling on the 12th.

Speaking of the stock market....stocks have risen about 10% since their lows in early June.  Market gurus have hated equities almost all year while stocks have risen nearly 12%.  Stock valuations that were cheap in the spring {and are not overvalued yet by our work} have entered a more neutral realm as they near the lower end of what we think is their valuation cone for 2012.  We will discuss the implications of this and our thoughts for the rest of the year starting tomorrow.

an tSionna {08.27.12}

It will be important to see how the market reacts to this resistance level we show at the top of our published chart.  There are two schools of thoughts to resistance levels.  The first states that the more times a market tries to breach a support or resistance level the likelier it is to do so.  The other school states that it is negative to see resistance levels unable to be taken out.  I'm more concerned about the fact that all of our money flow indicators are flashing overbought levels.  This has traditionally signaled some kind of correction.  As a reminder, stocks can correct by price {going down} by time {trading sideways} or a combination of both.  Just because we are overbought therefore does not automatically signal that stocks must trend lower.  Valuation and fundamentals also have a say in all of this which we will discuss in more depth this week.

*Long ETFs related to the S&P 500 in client and personal accounts.

End of Summer {Where We Stand}

This week marks the traditional last week of summer.  I say traditional because summer seems to be getting shorter every year.  School here starts now in mid-August and school for my sister's kids in Indianapolis started around August 15th.  But for Wall Street, summer is officially over next week after the Labor Day holiday.  That's when the summer homes get boarded up until next year and the A teams return to the trading desk.  

They are returning to a rather full plate.  We are going to explore this and the issues surrounding the markets as we head into 2012's homestretch.  Today we will put up a chart of the S&P 500.  We'll follow this over the next couple of days with some thoughts on the markets and a few other charts that hopefully illustrate where we think we are right now.  As you will see we believe the markets are at a rather interesting junction and the next few weeks should set us up for how we will likely trade into the year's end.

*Long ETFs related to the S&P 500 in client and personal accounts.

Godspeed Neil Armstrong

Neil Armstrong passed away today.  Those of us of a certain age and from a certain generation will remember exactly where we were when Armstrong landed on the moon and later when he put his footprint in the lunar soil.  Godspeed Commander!

Oh! I have slipped the surly bonds of earth,

And danced the skies on laughter-silvered wings:

Sunward I've climbed, and joined the tumbling mirth

Of sun-split clouds, --and done a hundred things

You have not dreamed of --Wheeled and soared and swung

High in the sunlit silence. Hov'ring there

I've chased the shouting wind along, and flung

My eager craft through footless halls of air...

Up, up the long, delirious, burning blue

I've topped the wind-swept heights with easy grace

Where never lark or even eagle flew --

And, while with silent lifting mind I've trod

The high untrespassed sanctity of space,

Put out my hand, and touched the face of God.

John Gillespie Magee, Jr  {High Flight} 

A gathering of angels appeared above my head,

They sang to me this song of hope and this is what they said,

They said come sail away, come sail away, come sail away with me lads,

Come sail away, come sail away, come sail away with me,

Come sail away, come sail away, come sail away with me baby,

Come sail away, come sail away, come sail away with me

                     Dennis De Young {Come Sail Away-Styx}

                               

10 Things Apple Won't Tell You

From Marketwatch.com  {Excerpt} 

From customer service to app safety and even how its devices affect our relationships, here are 10 things Apple won’t likely tell you about its products and its business.

1. “Our customers are worn out.”

All that initial excitement over the first iPhone or iPad has quickly given way to what analysts are dubbing “upgrade fatigue”—with even Apple’s most loyal customers upset about the steady stream of newer models. In fact, when people buy Apple’s latest product, the company is usually already preparing its replacement, said technology consultant Patchen Barrs, who has owned 25 Apple products over the past 20 years. “Everything we buy from them is already out of date,” he says....

It doesn’t stop with devices, said experts: Software upgrades also gently nudge people to buy new hardware. ....

2. “Be careful of that app.”......

3. “We’re getting in the way.Checking an occasional Facebook update via iPhone during dinner is the least of some couple’s worries. One in five people reach for their phone as a 21st Century replacement for the post-coital cigarette....”Personal responsibility and manners aside, there are other theories about why people can’t put their iPhone down. “Apple’s products are addictive,” says Larry Rosen, author of “iDisorder: Understanding Our Obsession with Technology and Overcoming Its Hold on Us.” 

4. “You may spend more with our devices.”

Not only do Apple’s products tend to be pricier than those of competitors, people spend more using them. .....

5. “We need another game-changing gadget.”

Upgrade fatigue isn’t the only thing critics dislike about Apple’s product rollouts; some say the new products aren’t new enough. Investors are growing impatient with Apple’s pipeline and calling for another tech revolution..... 

6. “The iPhone is overpriced—even compared to the iPad.”

The iPhone costs hundreds of dollars less than the iPad, but Apple has much higher profit margins for the phone than the tablet, experts say. Here’s how it breaks down: Apple earned gross margins of up to 58% on its United States iPhone sales between April 2010 and March 2012 and margins of just 23% to 32% on the iPad, according to a statement filed by Apple earlier this month as part of its patent battle with Samsung Electronics Co. ....Consumers think they pay a cheaper price for iPhones as wireless carriers absorb two-thirds of the original retail price, he says. However, customers who keep their iPhone and renew their contract after the initial two-year contract expires are paying a premium for using an old phone, he says.

7. “Don’t be fooled by our soft sell.”

...These two stories illustrate two things, experts say: Apple’s staff knows if children want Apple’s products their parents will want them too—and they never bombard customers with tech-talk. “They always start off by asking you about your lifestyle and your needs,” says Martin Lindstrom, author of “Brandwashed.” “They emotionally engage you so it’s harder to say no to their products.” Other electronic stores focus on price and technical specifications, but are slowly taking a cue from Apple Stores, he says....

8. “Our features are falling behind.”

......Five years after its launch and several upgrades later, some analysts say the iPhone is starting to feel dated. iPhone users can often be found trying to recharge their batteries in Starbucks, says Yung Trang, president of TechBargains.com. Samsung’s new SIII has a removable battery, allowing consumers to carry a replacement. What’s more, fans point out that the SIII battery has more power than the iPhone—more than 10 hours talk time versus eight hours for the iPhone on 3G. “The Samsung SIII is the best iPhone competitor in the space today,” says technology analyst Kagan. In many respects, it’s even better than the iPhone.” For big talkers, the Razr has 21.5 hours of talk time.

9. “We’ll hook you for life.”

Storing digital content like movies, music and books on Apple’s “ecosystem”—the company’s compatible suite of hardware and software—may lock in customers for life. There’s good reason Apple offers 5GB of memory free on its iCloud virtual storage system , analysts say. “Once you’re in, it’s a one-stop shop,” Fino’s Eisenberg says...... 

10. “Our fans don’t care if we screw up.”

.... Apple’s marketing also encourages this tribal following, industry pros say. The company’s borderline “fairytale” or “religious” language also helps stir up passionate support for the brand and upsets people when apple is criticized, says Lindstrom, the branding expert and author, who adds, “Apple knows how to inspire its customers.” Case in point: the company’s website contains this statement about the third incarnation of its tablet computer: “The iPad is a magical window where nothing comes between you and what you love.”

Quentin Fottrell writes for SmartMoney.com.

Link:  Marketwatch.com-Apple 10 Things.

*Certain clients of our firm own Apple  shares in their portfolios by prior purchase or client directed purchases.  Apple is a component of several ETFs that we own for clients and in personal accounts.  

Changes In Economics

From Freakonomics.com {Excerpt with my highlights}

There’s a revolution underway in economics. It’s not due to the financial crisis, but rather something more mundane: Data, and computing power. At least that’s the claim that Betsey Stevenson and I make in our latest Bloomberg View column:

“Consider the stream of data you will create today. Your metro card will record what time you caught the train. Your Web browser will note how you go about your job, and how much you procrastinate. A mid-afternoon purchase at Starbucks will reveal your penchant for lattes and the occasional cookie. Your flow of e-mail traffic will trace out your professional and personal networks.

At the same time, computing power has made it extremely easy and cheap to analyze all the data you produce. An economist with a laptop can, in a matter of seconds, do the kind of number crunching it used to take a roomful of Ph.D.’s weeks to achieve. Just a few decades ago, economists used punch cards to program data analysis for their empirical studies.”

Two weeks ago, Harvard’s Raj Chetty gave a spectacular talk at the National Bureau of Economic Research, about what he called “The Transformative Potential of Administrative Data.” He documented that today’s cutting-edge research is based on crunching newly-available data from the vast databases which underlay our schools, welfare state and tax systems.  I’m just as optimistic that new data coming online from the private sector will prove to be just as useful.

This empirical revolution is reshaping economics in at least four important ways:

1. The role of economic theory is changing: .....Now, its purpose is to make sense of the vast, sprawling and unstructured terabytes on our hard drives.
2. Empirical economics is a natural bedfellow for behavioral economics:  “The data revolution is, however, changing our theories — specifically the way we choose to model how people behave. For decades, economists assumed that people made calculated, rational decisions.   With new data on everything from how we choose our retirement savings plans to how NBA referees call fouls, we have learned to look beyond “homo economicus.” We have a much better grasp of the systematic flaws in reasoning that often get people into trouble. ... 
3. Individual-level data meant that we can say more about individual differences:
4. And a theme that will be familiar to readers of this blog: Economics has become a much broader social science....

The bottom line:

“Technological change has brought opportunities to do economics in a way that our predecessors could only have dreamed about. Those opportunities have, in turn, yielded a field that is more connected to reality. Our hope is that these insights will improve our understanding of the economy and give us a better shot at avoiding the next crisis.”

You can read the full column here.  And let me know in the comments if you think my optimism is misplaced.

Link:  The Economic Revolution Will Be Televised.

Smidiríní {08.16.2012}

A financial Plan For the Truly Fed Up.  {New York Times}

Housing Doubters Must Now Contend With Data {Reformed Broker}

More Evidence Investors are Turning Off CNBC  {Investor Place} For what it's worth Bloomberg TV has become better but it is harder to find on most cable setups.

Financial Products are Sold not Bought {Above the Market}

How Paul Ryan Captured the GOP  {The New Yorker}

This Year Versus Last

From Bespoke Investment Group

There have been numerous comparisons made between 2011 and 2012 since the start of this year.  In both years, the S&P 500 started off on a strong note before peaking and then selling off in the spring.  Looking at the chart below, however, shows that this year's market is trying to shake off a repeat of last year, and the timing for the divergence couldn't be better.

Last year at this time, the S&P 500 was in the midst of a three week 17% sell off brought on by slower economic data as well as the stalemate in Washington over raising the debt ceiling and then the subsequent ratings downgrade of US sovereign debt.  Like last year, the economy has been slowing and Washington still can't agree on anything, but for now at least, this year the S&P 500 has yet to run into the late summer swoon that has become all too common in recent years.  In fact, the S&P 500 is currently up more than 15% from where it was at this point last year.

My Comment:  While the two years share certain similarities {debt issues in Europe, slowing economy halfway through the year, fiscal policy issues here at home} there are differences.  For one US has economic growth albeit very tepid growth.  Another influence is the presidential election.  Another is that having spent over a year basically in a trading range stock prices became cheap.  They may be less cheap today but on a valuation basis, looking out over a 12-18 month horizon and based on what we know today, stocks still look attractive longer term.
Link:  Bespoke 2012 versus 2011
*Long ETFs related to the S&P 500 in client and personal accounts.

Schedule

The  combination of work, a few days off and getting my middle child back to college means a bit of a break over the next week or so.  I will post tomorrow, Tuesday & Thursday of next week.  Of course we'll break in if any major event takes place.  It is the summer vacation season on Wall Street so expect news to be a bit sparse between now and Labor Day anyway.

Levkovich on Long Term Market Returns

From Businessinsider.com

Citi's chief U.S. equity strategist Tobias Levkovich weighs in on the debate in a note to clients, saying its time to reconsider stock market performance over the last decade.

"It is very popular to suggest that the US stock market  has been a poor investment over the past decade-plus given that the S&P 500 and the Dow Jones Industrial Average are still trading below their prior highs," Levkovich writes, "yet, a fair amount of that narrative can miss some important perspectives."

The main points underpinning Levkovich's argument:

• The starting point for the measurement matters: Levokvich says that if investors got in the market after the tech bubble burst in 2002, they would have made a 70 percent return on the S&P 500 or 105 percent if dividends are factored in.
• Small caps have done incredibly well against the broader market: The Russell 2000 is up around 70 percent since 2000. Levkovich writes that "it is crucial to note that mega caps have been the big underperformers weighing down the broad indices and that may be in the process of changing given our lead indicator model and likely corporate profit margin compression which generally favor larger companies over smaller ones."
• Everyone is ignoring dividends: Capital gains was all the rage in the 1980s and 1990s, which makes dividends a very forgettable component of the investment story, according to Levkovich. He points out that "currently, aging baby boomers are somewhat desperate for income causing dividends to be back in vogue, but it has been 55 years since dividend yields last exceeded 10-year Treasury yields."

However, Levkovich also warned regarding stocks that "at some point, both severely high and extraordinarily low bond yields can send erroneous signals to markets as they have moved meaningfully away from the typical trend," and with the global investment climate currently characterized by heightened risk aversion, he expects stocks paying good dividends to continue to outperform.

Link:  Levkovich Reevalutating Stock Market Returns

*Long ETFs related to the S&P 500 in client and personal accounts.

On Retail Investors.

Excellent article by Dave Merkel over at alephblog.com/ regarding individuals and the stock market.  {Excerpt with my highlights}

{Dave has} seen a spate of articles lately on retail investors abandoning the stock market. Here’s a sampling:

1. Cult Figures — Bill Gross
2. Stock bulls have a beef with Bill Gross — Jonathan Burton
3. Why Are Investors Fleeing Equities? Hint: It’s Not the Computers — Andrew Ross Sorkin
4. Small investors vs high-speed traders — Felix Salmon
5. AMERICAN IDLE: FIVE REASONS WE HATE THE STOCK MARKET — Josh Brown

I chose these because I think they add to the discussion.  In general, I think there are a decent number of retail investors, that have left the markets, or reduced their exposure.....After 2008, more people concluded the stock market was rigged.  Why?  Because they lost money, and that couldn’t be their fault.  Sorry, but retail investors, and many professionals too, give way to fear and greed, and chase trends.  They are not invested at the bottom, because they are too scared.  They are invested at the top, because it is the “thing to do if you want to make money.”

Call my point 1 this: People who don’t understand investing buy and sell at the wrong times.  They panic and get greedy.

Point 2:   People don’t get that returns are lumpy.  They happen in spurts, over months, years, decades.  This is the big problem with financial planners — they assume smooth returns that will assure a retirement.  Sorry, but market moves in regimes, and is not easily predictable.  There are a few two decade periods where the market goes nowhere.  They are not anomalies; the value of companies are catching up to their prices.

Point 3: The estimates of equity outperformance sold by consultants, financial planners and naive journalists exaggerate the reality.  Here’s the reality: equities perform maybe 1% better than Baa/BBB bonds, particularly when you analyze the investments on a dollar-weighted basis.

Point 4: Everyone loves a winner.  People were spoiled by the returns of the 80s and 90s, and that validated in their minds the idea that more stocks are better; the projections of the financial planners are conservative; equities always beat bonds.

Point 5: Most ignore long-term valuation metrics, whether professionals or retail. .....{T}hey say roughly the same thing at present: equities are overvalued long-term.  Short-term is another matter: P/Es aren’t that high and momentum is running.  But how short is your horizon?  This makes sense if you are willing to play for months, not years.

Point 6: Professionals changed too.  In this market environment many professionals have started to trade more, as if we don’t trade too much already, and I think this is the wrong response.......  

Point 7: But regardless of who holds stocks, they are still held by some entity.  They don’t disappear.  They move from weak hands to strong hands.  The trouble for retail investors is that they are weak hands on average.  They can’t handle disappointment, versus value investors who buy when there is disappointment.....

.....Personally I don’t think that retail investors are abnormally disappointed at present.  This is just market noise — we face overvaluation, but positive momentum.

Me?  I keep owning undervalued companies for myself and clients.

Link:  Retail Investors and the Stock Market

.

Stocks Above the 50 Day

From Bespoke Investment Group

As of {yesterday}, the S&P 500 was back above 1,400 and one good day away from taking out its bull market highs.  So how does underlying breadth look?  As shown below, 79% of the stocks in the S&P are currently above their 50-day moving averages.  This is the highest reading seen since mid-March, but it's not quite at the levels seen in January or late last year.  This 79% reading is indicative of a healthy rally, and one that still has room to run on the upside before it flashes a sell signal.

The rally over the past week has been driven by big moves higher in the cyclical sectors.  Technology, Financials, Industrials and Energy all have readings above 80%, with Energy the highest at 96%.  Defensive sectors like Health Care and Consumer Staples have readings in the 60s.  And while 87% of Utilities stocks are still above their 50-days, this is actually down from the 100% reading we saw a week ago.  

We've seen some clear rotation out of defensives and into cyclicals recently, which tells us that investors are positioning themselves for another leg higher.

Link:  Bespoke: 50 Day Moving Averages.

And if you're wondering how this squares with my move to a NET MARKET NEUTRAL rating yesterday, please remember that what this indicates to me is that in general equities {via ETFs for us} are a hold right now.  This means we are balanced more or less with buys and sells.  Stocks are neither better to sell or better to buy in aggregate at the moment.

*Long ETFs related to the S&P 500 in client and personal accounts.