Market Pulls Back As Expected; Will It Continue?

This is a quick update due to the notable market pullback today. Over the weekend I noted that the wave was at the peak and a pullback was more probable. That prediction came true today as markets rolled over as much as 2%. Now, the question is, will it continue? I think the answer is yes, in some form.

The interesting thing is that today’s action only moved the wave cycle down a little bit, shown in the illustration below. We’re just off the top of the peak, but nowhere near a bottom. This aggressive first move tells me that there may be a little bit of gyration before we get another big “woosh” moment lower, sometime in the not so distant future.

The backtested rule set does not yet dictate a change in portfolio construction. It is looking for another day of confirmation before doing so. Another down day would likely do the trick.