Over the past couple of weeks I have written that we were getting close to a technical buy on some of the broad equity markets. This week we toed in our first buy tranches on the S&P and the TSX. We still have a lot of cash not yet committed. If the recent up trend of the past week continues, we will be no doubt be adding more capital in the weeks ahead. But if the trend breaks down again, we will have no hesitation to exit.

I can make an argument for why markets could rally here. I can make an argument that they may be likely to break down again in the not too distant future. I have said prices could react similar to 1973-74, when the market fell 40% to October 1973 before rallying 13% from November to February, and then breaking down to a fresh low in the fall of 1974. That produced 2 back to back annual losses of -26% for the US markets during that cyclical downturn of the secular bear that ran from 1966 to 1982.

This recession is going to last longer than most are prepared for. The economic data will undoubtedly be dark for several months to come. The stock market will work away at re-pricing as it goes. At present, I am neither a bull nor a bear. Until the trend stabilizes further, I would caution against making strong bets with capital either long or short.