Some of the momentum indicators have reached levels that dictate a short term overbought condition in the market, however, given the possible nature of this next move higher I would expect most of these models to continue further into overbought territory and further price increases in the indexes.
On the intermediate term front, today marked the turn up point of the fear indicator that is represented by the red line below the chart.
This almost the last piece of the puzzle we need for a full confirmation of the most recent low being a major low. The very last piece is the Three Line Break chart of sentiment or as close as I have found to an intermediate term Holy Grail and it is very close to turning up, but as of yet keeps us waiting.
The early morning decline in equity prices made just about a perfect bounce at the 50% retrace level and moved sharply higher from there.
Although I cannot rule out a test of the 62% retrace level, the probabilities are leaning heavily into the camp of the correction running its course.
In a nut shell, everything remains pretty much as we had thought it would and we remain strongly in the buy weakness mode.
Currently our assett allocation model to equities is sitting at 60%, awaiting only the turning up of our last intermediate term model.
If you did not have a chance to take a look at the weekend comment part II, please take a look at it as it offers some very serious insight into the current market conditions.