[isatrader]

Are we on the cusp of a continuation versus start of a bear? I really am wondering what is going on. I note that a 50/50 world/uk fund that I have part of a pension in has just made a new high.

Stage 4 doesn't necessarily mean that there will be a bear market as during major bull markets the Stage 4 breakdowns tend to be short, sharp, flushes which die out very quickly as bargain hunters come in. But you never know whether a breakdown into Stage 4 is just a correction or the start of a bear market and hence when it does happen Weinstein's method recommends being predominately in cash or short the market.

Currently, the UK market is in varying phases of Stage 3, as can be seen from the FTSE100, FTSE 250 and AIM All Share Indexes below:

           

As with the US, the UK market is seeing a rotation to the larger cap value stocks at the moment, with small and micro cap stocks getting hit hard as you'll have seen from the large number of Stage 3 and 4 stocks appearing in the daily watchlists. But the quality of any new breakouts has continued to be quite poor, and so that makes me cautious still on whether the breakouts in the larger caps is to be trusted or whether it's just the last part of this phase of the bull run that began in 2011, as the large cap defensive stocks are always the last to breakdown I believe.

So I'm continuing to sit on sidelines, as I have since late March, as the quality and quantity of Stage 4A breakdowns continues to outnumber the quality and quantity of Stage 2A breakouts by a long way. Although last week was the first week in a while, that the Stage 2 breakouts and continuations where showing better quality imo. So a short term improvement, which can be seen in the bounces in the small and micro cap charts above.