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TECHNICAL FLASH - Sluymer - Market correction, levels, VIX, VXN, Real yields bottoming?, High Beta emerging, relative screens favor cyclicals

September certainly looks to be on track to live up to its historical reputation of being volatile!

However, despite this week’s painful sell-off, we see a number of encouraging technical developments underway and see support for the rotation toward cyclicals developing in the bond market.

As reminder, our long-term outlook remains unchanged viewing the March lows as a major market cycle low consistent with a typical 4-year cycle bull market. Volatility/weakness in September, while painful, is likely a healthy pullback consolidation that needs to develop for the cycle to continue and is tactical in nature not longer-term. We continue to recommend a barbell portfolio favoring secular growth AND cyclical growth with cyclical growth the more attractive risk reward area to increase exposure through year-end. This week’s market volatility continues to support that view in our opinion as outlined by the charts below.

A non-random walk through this week’s key technical chartsCharts 1 and 2 – S&P and Nasdaq are collapsing to next trading support levels while volatility indices (VIX and VXN) are well ahead and at next technical thresholds after diverging to the upside through August. We would not be surprised to see the 3-day rule take effect. Steep sell-offs often t...

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