The S&P 500 continues its ongoing rally and is approaching 4300, which is its highest level since 8/17/22.  The bulls off of the October low have clearly had the better of the bears.  Admittedly, I have been in this latter group having an unfavorable view of the overall equity market.  Despite this ongoing strength in the cap-weighted index, several key indicators that I monitor, and that have been historically reliable, continue to not support the full extent of the rally.  Does this mean that these signals are just wrong this time around?  Based on my work, the answer is a NO. 

With that being said, those same unfavorable flags are doing a good job of forecasting what the broader equity market has been doing and where it is likely headed.  We can use the equal-weighted S&P 500, S&P 500 ex-tech/AI-related, or Russell 2000 as examples of indexes that are less dominated by the top 10ish Large-Cap Tech/AI-related plays that have dominated the cap-weighted indexes in which they are constituents. 

So, what is the base case for equities?  New Bull or Ongoing Bear?  Although this may sound nonsensical to some, maybe for now, it’s BOTH.  My research shows that an odd occurrence has a decent probability of happen...

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