There is literally almost nothing new to report in the way of developments since our last article - The S&P500 is still sitting just a hair above its January high, currently invalidating the terminal pattern that developed to start the initial move down.
This does increase the case for another bullish run in the short-to-mid-term, however the markets have stalled after long time-frame of consistent buying, making higher highs on waning technicals, including the Advance/Decline ratio (which was actually negative for the S&P500 yesterday).
Unfortunately for the shorts, markets like this can plod on for a while - Hope is something that takes a while to fizzle out, and in the meantime it can be an unbearable experience for those waiting for the reversal. Patience is key, and if you don't have that, sit on the sidelines and wait for a clearer signal, or find a few long trades to make in the interim.
A word of caution, however - even though we've scaled back our short position in the meantime, we are not committed to a major long move in the individual markets. That's not to say that some individual stocks and other assets could have excellent performance, as there are great buying opportunities in every market, if one knows where to look.
As such, be careful if you trade to the long side - I'm expecting some sort of small-at-minimum pullback in the markets because they are weak and overbought. But if this consolidation keeps up for some time it usually means the market is building something big and isn't quite ready to pull it out of the oven just yet. Right now it's like watching paint dry, and one needs to be prepared for a move that will surely take either the bulls or bears by surprise.
Economically we are in worse shape than before the major stock indices started declining, with only a fraction of the horribly mailinvested resources from before being liquidated - the rest are hidden on bank balance sheets and undercapitalized, or guaranteed by the government - not to mention that if you factor out the trillions dumped into the economy by the State the GDP numbers are still very negative.
The fact that such a weak recovery has been eked out by such a tsunami of keynesian and monetarist policy indicates that the psychology just isn't taking like it used to - People's attitudes toward money are changing, and such a change takes time - especially after a multi-generational growth of acceptance for burdensome debt.
Stay wary out there because, just like last time, when deflationary forces hit they will snowball quickly and take the maximum number of committed market participants by surprise.