As it has for some time, the technical market backdrop continues to support a bullish outlook through year-end and well into 2020, with cyclicals incrementally building traction at the expense of “safer” sectors and stocks. For a fundamental view on this please see page 3.

From my perspective, the equity market’s behavior remains consistent with a market in the early stages of a second leg up in a normal 4-year cycle, similar to developments in 2016 and 2011.

Financials and industrials lagged but continued to bullishly consolidate above their long-term secular uptrends defined by rising 200-weeks simple moving averages. The long-term price patterns illustrated below remain compelling as both sectors appear to be early in new bull cycles.

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In addition, I continue to see technical evidence across all asset classes supporting further rotation toward these cyclical areas of the equity market at the expense of more defensive groups and stocks.

The lopsided overweight positioning by institutional managers in bonds and safety groups and underweight positioning in equities, notably cyclicals, remains a major catalyst to further accelerate this rotation. If cautiously positioned investors begin to experience FOMO (fear of missing out), demand for risk-on assets could...

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