The excessive focus by so many technical traders on the short-term overbought condition of the Standard & Poor’s 500 index (SPX) is misplaced. Focus should be on the longer-term accelerating bull market.

When equity markets begin to trend following break-outs, short-term indicators, such as relative strength index (RSI), often remain overbought for extended periods of time.
I continue to caution investors from attempting to micromanage near-term pullbacks at the risk of missing the bigger underlying uptrend. To reiterate my recent recommendation, add to cyclicals on pullbacks and use the current bounce in defensive stocks and bonds to reduce exposure.

Semiconductors sold off sharply this week, led lower by semiconductor capital equipment, raising concern that their bull cycle was ending. I have focused on this group multiple times as one of the reasons to remain bullish through 2019. After all, semis relative performance bottomed in advance of the SPX in October of 2018 and has led through the year.

The SOX semi index has rallied 65% from its cycle low, 36% of which developed since May. Given the group often leads bigger market reversals, clients are questioning whether this week’s weakness is signaling a more ominous downturn for equities. My view is their recen...
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