Yesterday, the market sold off modestly over continuing concerns of “tariffs” and trade wars. At least that was the headline reason. The real reason was simply that the market is overbought in the short-term and traders were taking profits in a light-volume session. As shown in the chart below, the sell-off yesterday is now turning previous resistance, when the market broke out to new highs, into support. As long as the market holds here over the next few days, we continue to expect a further, albeit bumpy, advance to 3000 by year-end.

In this past weekend’s missive, I wrote:

“However, between now and then, the markets will likely continue to try and push higher as investor confidence continues to swell, pushing investors to take on ever increasing levels of risk, particularly as it appears as if the economy is firing on all cylinders…

With the move in portfolios back to full target allocations, there is not much for us to do right now except to remain on the lookout for the risks which could rapidly take away our performance…At the moment, we are in good shape just to sit back and ‘watch the show.’”

Interestingly, that statement triggered an interesting email:

“Can you feel the complacency in your weekly newsletter? Just sayin’…kinda eerie. I know you know the risks, but to say at this point we need to sit back and ‘just watch the show’ as the S&P plows on to 3000 and beyond. It sort of puts you on the same side of the crowded ship with everyone else. How many times have you ingrained when everyone agrees something is going to happen, something else likely will.”

No, I haven’t abandoned all reason.

In the short-term, we have to participate with the “running of the bull” as long as possible. This isn’t the first time, that I have discussed being long-biased in portfolios. Here is what I recommended previously: