I'm all in

With the macro indicator pointing up for the next several months, combined with healthy technicals, I deployed my cash and am now fully invested.  As far as technicals, I would have liked to see a positive weekly RSI divergence, but it appears that the market will form a "V" and head upwards from this point forward.  A break above 2139 will satisfy a 3ATR reversal and signal a new trend.

Maybe a good time to shed your least favorite stocks

As I mentioned in my last post, we could experience a correction into October.  Recent market action, specifically the weekly RSI of the S&P500, is exhibiting a negative divergence.  This is in line with my macro indicator.  Thus, if you have positions that haven't served you well and you'd like an opportunity to use monies from these positions to buy something else at possibly attractive prices in the coming months, I would consider doing so now.  I plan to lighten up on some alpha but stay the course with my dividend stock portfolio

What's on the Horizon

Despite the market volatility, staying in the market has proven to be a sound approach.  Since my last post in which I recommended being in the market, I haven't sold anything.  Looking forward, I just want to reiterate that there could be a correction in the fall.  Specifically, the macro indicator is showing a possible peak in August followed by a trough in late October.  I would use any corrections during this period as a buying opportunity.

Looking further forward, I'm keeping my eye out for possible deterioration in the early summer of 2017.  My (leading) macro indicator heads down beginning in June and it's too early to tell whether the summer will represent a significant peak.  In other words, my macro indicator hasn't gone negative yet.  For those that have been following my blog, I consider a macro reading of -20 to be significant and a signal of a possible bear market.

So for now, I don't plan to do anything but to look for opportunities to add to positions in late Fall if the market corrects.

Soon it will be riskier to be out of the market

As I've mentioned in my prior posts, the macro indicator points to a trough in mid-April.  The likelihood of experiencing a significant pullback is diminishing.  Again, to reiterate, there's a possibility of a fall pullback, but the overall risk of being out of the market are greater than staying in cash.  The macro indicator is showing positive signs into the spring of 2017.

Today, I increased my dividend stock exposure (slightly) by buying CMP and WFC which are still undervalued.  I deferred buying these two stocks a couple of months ago because of their lower relative performance.  Because I have a positive bias on the market over the intermediate and long term, I went ahead and bought them.

The only segment of my portfolio that still remains mostly in cash is what I call "Alpha" or my core equity allocation which makes up 20% of my portfolio.  I plan to deploy my cash to fill this allocation within the next week depending on market action.

So in summary, my plan is to be fully invested soon.  I'll likely have a few percentage points in cash because certain dividend stock selections remain overvalued and aren't yet candidates for purchase.

Still keeping to my word

So it's been awhile since my last blog post, but nothing has changed my opinion or my plans going forward.  The month of March should be very telling -- as I mentioned in my prior post, my macro indicator shows a weak March with a trough as we approach April.  I will be looking for opportunities to become fully invested over the next month if the market "behaves" as anticipated.

Just when I thought things were going to be quiet for a while

So after my last post in which I described the possible triggers that would cause me to dip my toes back into the water, the market popped on news that the ECB might implement stimulus measures.  Oil prices nudged upwards as well.  If the market closes above 1880 tomorrow, the S&P chart would carve out a basic RSI divergence.  I say basic because the divergence would be created with only two weekly bars versus a divergence over several weeks, which would be a stronger positive signal.

I assessed the daily money flow indicators and they look pretty good.  So what now?  Before I get into my game plan, I wanted to share with you what's on my watchlist.  Now don't fall asleep reviewing this list -- Yes, they are boring dividend stocks.  Here are the tickers:  MO, AEP, PPL, CVX, KO, CMP, DUK, EMR, LNT, FAST, GE, GIS, GPC, JNJ, D, PEG, PAYX, PM, PG, O, SO, SE, UPS, VTR, VZ, WFC, AND HCN.

Of these stocks, I would consider buying those that have weathered the storm well (i.e., exhibited good relative strength over the past 3 to 6 months) and those that are at or below fair value.  All with the exception of the following would pass this test:  CVX, CMP, EMR, FAST, GIS, PEG, PAYX, O, SO, UPS, VTR, WFC, AND HCN.  I would feel comfortable with this approach given the potential for further downside.  Executing this plan now would raise my equity exposure by about 20%.  As far as the "alpha" or growth components of my portfolio, I'll likely defer purchases to see how the market behaves absent rumors about further stimulus by the ECB.

Despite new lows, I see dollar signs!

So the market is "behaving" in a manner consistent with my macro indicator - Great!  Unfortunately, one the thing that the macro indicator isn't designed to do is pinpoint the exact bottom with regard to price or time.  As I mentioned in the prior post, the indicator is "saying" that a possible bottom might be in place in mid-April.  With this in mind, I wanted to share my mindset in terms of next steps and in particular, the triggers that would cause me to buy into the market.

Before I get into the triggers, I wanted to amuse myself by sharing an observation.  Even though I don't customarily use target levels to influence my actions, I did a Fibonacci analysis and concluded that there's strong support at the 1740 region.  There's support at 1800 as well, but it doesn't appear as strong.  I'm not saying that the market will correct to this level, but it is rather "convenient" that this would represent about a 18% correction and be close to the -20% figure that the media loves to refer to in judging whether we're in a bear market -- After-the-fact of course.  If the market were to approach this 1740 region, it would likely flush out the weak hands who believe that a bear market is impending.  I still don't believe that we are in or will experience a bear market this year.  In fact, my macro indicator is saying that we will close out the year higher than the anticipated April trough.  So what would cause me to dip my toes back into the water?  Here goes.....

As usual, I would be looking for a weekly RSI divergence.  This is my favorite long-term indicator -- to see the RSI reverse as price continues downward.  In simple terms, one scenario which would cause a divergence would be for the S&P to make a new weekly low and then close (during the same week) above the prior week's close.  Let's use last week as an example.  During the week of January 11, the S&P hit a low of 1858 but closed at 1880.  Now, if during this week, the S&P trades at or below 1858 and then closes above 1880, this would be a positive sign.  I would then look to other indicators such as money flow to confirm this positive turn of events.

Another indicator that I like to use is a reversal of the trailing ATR3 (Average True Range with x3 multiplier) stop.  As it stands today, a reversal over 1976 together with confirmation from other indicators would signal a buy.

So there you have it.  The strongest message here is that I still believe that we won't experience a bear market.  It's appears certain, however, that the market will again trade lower than the August low (1867).  As I'm writing this blog, the S&P futures are trading at 1851 cash.