Time to think about a possible bear market

As I mentioned in my prior posts, my macro indicator has been showing signs of significant weakness. If this weakness persists, it would translate to a possible top in the S&P 500 sometime between early August and mid-September with the greatest likelihood being August. I've been wary of warning my readers too early because the macro indicator has had some short periods of positive movement. However, in looking at the trendline over time, the positive short-term movements have traced lower highs and it is now close to giving me a confirming signal. Until I get this confirming signal, it's important not to overreact. It would be prudent, however, to harvest some gains and think about selling holdings that have exhibited poor relative strength. Irregardless of the macro indicator, my trading system is calling for a 50% reduction in core holdings if the S&P falls below 2070. I'm often asked if I would short this market. My philosophy on this topic has been to only consider shorting when my macro indicator supports it. In addition, I would only consider shorting if a downturn appears as though it could be protracted and deep (i.e, 6 months or more). All technical indicators have limited predictive potential, but my macro indicator which gauges market liquidity, is "saying" that a downturn could be on the order of 10+ months. Again, this estimate will only be valid after I get a confirmation. So until my next post, I'd highly recommend you think about what you would do in the event of a bear market. If and when I get a confirmation, I will detail my strategy including an approach to shorting the market if I believe the risk in doing so is worth taking.