The last few day’s market action is pretty typical of what we have seen all year.  A few big-cap names drive the indices up when they can, while the great bulk of stocks drive the market back down on days when the big-cap names don’t do much.  Much of the positive action in individual names have not been keeping pace with the indices. This action is a good demonstration of why 2015 has been a very frustrating year for many investors.  

If you aren’t in a narrow group of key stocks, it has been extremely hard to find returns. The indices simply don’t reflect the action in the average stock. The median stock in the more comprehensive universe measured by the Russell 2000 is down 9% ytd and 1/3 of the index is down around 20% or more.  Commodities are still down significantly for the year, European markets are flat, Emerging Markets are down significantly on the year, even the US Aggregate Bond Index, AGG, is struggling.  Just goes to show how difficult a year 2015 has been, especially for small/mid-caps and emerging economies.

All-in-all, the major indexes are still trading within a directionless wide range but are closer to our traditional “risk on” levels.  Maybe we will see a break-out of this range to the upside?   We will be monitoring things closely to see if there is enough evidence to warrant putting risk back on in this environment, but for now our decision is to stay conservative.

Recent positive trends we are monitoring: 

•    Pessimistic sentiment despite recent rallies (bullish). 
•    Seasonality favors a bullish bias.  
•    Technically some key indices have recaptured our “risk on” levels AND new highs are expanding.  While this development is limited to a handful of stocks, with so many stocks down in correction mode right now we are watching to see if this starts to spread further into the broader based market.  If it does, we may have the opportunity to see some positive movement in 2016.  

As always, we will remain disciplined with our risk management approach and look for confirmation of improving market data points.

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