Message from Jon
This market has been anything but fun over the past 3 weeks. According to Jim Tissoni, the DOW dropped 6.7%, NASDAQ fell 10.9%, and the S&P 500 declined 8.8%, but the biggest loser was the Russell 2000 loosing 12.5%! 1What kinda month am I having..."frustrating" would be a good word here.
Listen, if you have followed ANY of the numerous newsletters I have released in the past year or so, you should know that this market was overcooked and at levels that defied common sense. That being said, it was not easy to see the declines in assets and not want to run for the hills with any profits we have left. Risk is risk, and it is either working in your favor, or it is working against you. The transition is rapid and rough.
In one week's time, Stormguard shifted from -0.10 on Friday the 19th to -0.87 as of last Friday! 2 D/W is still favoring domestic and international equities, but even those have fallen in strength, and of the 18 charts that we watch, 16 of those are demonstrating a "Bear Confirmed" signal at the moment.3
COULD the market rebound? sure it could. With 2 months remaining and a historically strong 2 months in the market, sure. Will it? ...that I am not sure of. The odds are that if it does, it may be 5-7, maybe 10% upward followed by more, MUCH more downside.4,5 These past couple weeks, I have made numerous changes to our accounts to protect principal and stay within those positions that are still showing a bullish trend while eliminating those with bearish trends surfacing.
This raises cash levels in accounts and also reduces further risks to principal. One more thing: selling those holdings that reverse in their trend confirms that any rebound or rally they may demonstrate happens without us. With mixed signals, the best thing is to be patient. We rebalance our holdings, realign our portfolios, but not remove all the capital. "Well, if you're so confident, why not all or nothing?" The market doesn't go straight up, just like it doesn't go straight down, so we have to behave in a complementary manner that reflects the market conditions and probabilities for success.
At this moment, the highest probability of success is to evaluate, realign, and wait-so that is what we do. We might add some hedge in here and there as a boost to some accounts, but overall...we exercise patience, as hard as that might be at the moment to actually do!
Till we speak again, enjoy your week!