Our indicator constructed from the trends in the CRB Index, gold, and yields on the 10 year Treasury has not been in the extreme zone for 8 weeks now , and within the context of a trend following strategy that I have detailed here, here, and here, the SP500 should have a positive bias. In essence, with prices on the SP500 above its 40 week moving average and our indicator not in the extreme zone, prices should move higher. The trend remains up and inflation pressuresare neutral. This is the bullish case for equities.

But let's me be clear about one thing: the gains that equities might enjoy are unlikely to be as great or as accelerated as if the market is coming off a bottom. With rising bullish sentiment and less money on the sidelines, stocks just won't have that "uumph". Gains are possible but not at the rates that are seen at market bottoms.

The indicator constructed from the trends in the CRB Index, gold, and yields on the 10 year Treasury is shown in the middle of a weekly chart of the SP500 in figure 1. I last discussed this strategy (click here) 8 weeks ago in the context of "buying the dip".

Figure 1. SP500/ weekly