Resistance Ahead

Following a-20% peak-to-trough correction in stock markets in December, we are now witnessing a powerful oversold rally. How far will it run? Is it a counter-trend rally in a new bear market or the beginning of a new leg higher in a still-ageing bull market? We are about to find out. Stock indices are approaching strong resistance overhead. The long-term 50-week moving average has started to coil downwards for all the major indices for the first time since 2016. This should cap the recent rally in stock markets. If somehow equities can power through the strong resistance overhead and turn the moving-averages back up, turning resistance into support, it will be some performance by the bulls. In that event, the Active Asset Allocator will return to a fully invested position. Until then, defense remains the priority.

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