In the last two weeks the market has declined. The week of April 2nd saw a drop of 0.74% and the week of April 9th saw a drop of 1.95%. These declines were within the expected weekly trading range. I expect that the 2nd quarter of 2012 will not be quite as frothy as the first quarter and expect additional corrections based on the fact that the intermediate signal (blue line Chart 1 below) crossed zero last week. The long term signal (green line Chart 1) has not indicated that it is time to sell so one should continue to hold and seek opportunity when there is a significant decline. This week the expected S&P 500 range, as shown in Chart 2 below, is between 1,321 and 1,420.
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| Chart 1: 4/13/2012 S&P 500 Market Sentiment |
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| Chart 2: 4/16/2012 Weekly Expected Trading Range |
The "Super Signal" was indicating in December last year that the market could be heading for a crash in 2012. However, the first quarter rally has caused the "Super Signal" to fully reverse course. The "Super Signal" is very unlikely to form in 2012 and lends some support to the long term Sentiment signals indications in Chart 1. Based on these signals I expect that it is safe to stay invested in equities at least through the end of 3rd Quarter 2012.
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| Chart 3: Super Signal |
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