Proprietary Indicator: Back to consolidation in Apr 2024.

Back in 25th Jan 2024, I posted that the proprietary indicator have the probability that it's risk on for the market (go bullish, but caution because of waning strength):

Although we didn't have a clear signal, the indicator flashed "caution" on the last week of march. Because the market was so hot, I wanted to see a catalyst that might start a period of consolidation before turning defensive. Today's larger than expected CPI data might be that. The Consumer Price Index climbed 0.4% in March, the same increase as in February, and exceeding the 0.3% rise that economists expected. That indicates that the hot readings in January and February may be more than a "bump" on the path to inflation heading toward the Federal Reserve's 2% goal.

The markets were expecting the FED to no longer raise rates and even lower them three times this year. Hence, any higher than expected inflation will challenge that expectation.

Although I see 2024 as a bullish year, periods of consolidations will occur before a year end rally.

If we are headed into an intermediate consolidation, we still have a ways to go to flush out more of the "dumb money".

Taken together with the risk structure as shown in our indicator, a period of consolidation is likely in the cards and I will treat the markets as taking a pause until the indicator flips back again. No one would blame a trader if he took profits from positions that are too much in the money (especially the inflation and interest rate sensitive stocks) and then wait and see.

The next few weeks will be good to patiently look for bargains to re-emerge amidst the churn. However, this market is tricky

Stay safe!

For educational purposes only. The signals posted does not prescribe any trading decisions. Consult a financial advisor before initiating any investment or trading decisions.