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Price Action
[neutral]
Volatility continues to decrease on multiple time-frames (F) as the market remains overbought (E). A combination of very low volatility within an overbought market triggers a negative signal (J).
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Seasonality
[positive]
Seasonality is bullish for week 4 (C/D).
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Breadth
[negative]
Market Breadth (J) is up, though significantly overbought.
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Sectors
[negative]
Sector leadership (K/L) changed during the week. While XLI (Industrials) continued it’s run, XLY (Consumer Discretionary) came in second. XLI/XLY combination signals a healthy environment. Combined with an intermediate oversold filter we’ve got a slightly negative setup.
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Bonds
[positive]
The bond market (M) continues to improve as risk willingness is increasing. Given the small sample size this setup has a lower significance.
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Outlook
Last week’s call worked out! While the overall environment continues to improve the market is significantly overbought and due for a pull-back. For the coming week I expect a lower low than the week’s open.
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