Folks, don’t get too bearish. It’s not a good look when the cycle backdrop remains positive technically. Over the past few week’s I’ve discussed the technical reasons why I remain positive on the market overall, despite the sell-off that developed in May. Certainly, the headlines have been worrisome and many very level-headed clients have told me they are very concerned about a deteriorating economic and fundamental backdrop.

Now, the technical backdrop can also be interpreted with a very defensible negative spin. So why do I remain optimistic?

The first reason is that my long-term cycle work remains bullish for equities. I view the most recent pullback as part of a normal, healthy unwind, or retracement of the surge that developed in Q1. Investors worry about prices, but time is an important part of any correction and the weekly indicators I use to monitor shifts continue to point to a choppy, zig-zag pattern through Q2 into Q3. There are positive divergences that have developed over the past 1-2 weeks that support my call for an oversold trading bounce, a bounce that is now underway.

First, focus on the behavior of semiconductors, which often lead market turns. Semis were very oversold from a trading standpoint heading into last week and their performance rela...

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