Over the past week all of my core market health indicators fell. My measures of market quality are still hanging on, but fell sharply this week. Although they didn't go negative this week it is likely they will by next Friday unless the market rallies sharply. The core portfolio allocations remain the same.

One thing of note is that the two least sensitive components of my market risk indicator are currently warning. The other two have some breathing room, but they are more sensitive to price moves so a break below 2040 or 2000 on the S&P 500 Index (SPX) would likely generate a market risk warning. In the absence of a market risk warning the volatility hedged portfolio is still 100% long.

The current range between 2040 and 2140 on SPX is now six months long. Tight ranges like this one that are only 5% wide represent either accumulation or distribution. By looking only at price we can't tell which it is until the range breaks. But, looking at my core indicators and other ancillary factors the odds favor distribution. This makes it likely that a break below 2040 on SPX will continue into a decline of at least 10%. Now is a time to get cautious.