* * *
Two weeks ago, markets were overbought after rising 12% in 6 weeks. There was a strong edge to expecting some weakness (post).
One week ago, markets were oversold after falling 3-4%, and there was a strong edge to the upside (post).
There is no compelling edge, short term, this week. Longer term, the best edge is for upside into year end. Putting those two thoughts together, the best set up would be for markets to sell off in the next week or so, giving some upside potential into year end. It may not happen, but that would be ideal.
It's not a secret that seasonality is a strong tailwind into year end. The period from Thanksgiving to year end has been higher 80% of the time, by an average of 2.2%, since 1990. The only horrible return came during the 2002 bear market (post from Chad Gassaway on this topic here).