Markets are Overbought

Markets are overbought (overstretched). So, it’s normal to see some declines these last few days. Although the markets ended with only small losses today, this was after they pared their larger losses earlier in the day. This is partly due to China saying it was willing to work with the United States to resolve trade concerns, which helped allay investor’s fears. However, the thinking now is that the “phase one” deal may not occur until some time next year instead of this December as mentioned in an earlier WLC Weekly report.

Note that we’re beginning to see U.S. defensive sectors build momentum (which often results in outperformance). It’ll be important in the coming weeks to gauge the market’s ability to return to gains, or switch into a correction, or worse.

Oil gained, due in part to OPEC and allies likely to extend output cuts into mid-2020.

Lastly, while equity markets have been softer, Canadian and U.S. Aggregate bonds (XBB, AGG) have seen some improvements in the last few days, today notwithstanding.