I was expecting some sort of a bounce in the past few days after the S&P 500 dropped by a quick 50 points. The market has instead traded sideways. Most of the sentiment indicators I look at are mixed but some are starting to move towards excess bearishness. We are entering a seasonally strong part of the year where we don't generally see extreme bearishness unless there is a crisis.
The highs in the market came a little over six weeks ago making us oversold in the intermediate term. Its not a great oversold reading because we chopped around for a while after the market made a high. If we get some turmoil into the election we will likely get a better oversold reading and sentiment is likely to be excessively bearish. That would likely prove to be a good buying opportunity.
At this time of year I make an effort to have a positive bias. I have used the recent weakness to build a medium sized net long position. If we do get a further decline into the election I will likely take a more aggressive stance on the long side.