Message from Jon
Talk about a yo-yo!
The market conditions at year end were nothing short of severe, giving investors whiplash on top of sea-sickness on top of more whiplash. As previously indicated in our newsletter, we have achieved the lowest indications of a bearish condition in Stormguard since we have begun to deploy it, and Dorsey's Relative Strength indications declined precipitously as well, leaving all but 2 charts still remaining bullish but hanging on by their fingernails. 1,2
After last week's rally and rise, conditions have begun to lighten as I am sure (by reading some of the headlines)-so have the hearts of investors it would seem. However, when you look closer or closely enough, you can see some interesting data that would/should leave you skeptical of the recent break in the tide of sentiment.
As we see that when the market declines, say, 500 points and then has a good day, rebounding up 350, although we are seeing "ups and downs," we do not quite see where the markets have reached or even surpassed the original points of interest. BUT...for the sake of clarification, let's assume we did for just a second. Keep in mind the following:
$100.00 investment that has declined by 10% = $90.00
A week/Month/Year later the market climbs up 10% = $99.00
Let's look at it in a more pronounced manner...
$100.00 investment that drops 50% = $50.00
A week/month/year later the market rebounds 50% = $75.00
Although the principal is the same, the results are much more significant. This is why when I speak with you, I am not worried about a 10 or even 15% decline in account values since under the right market condition, those losses can be recovered fairly easily. It's the hurricane losses of 25, 35, 50% that are more difficult to recover, and they certainly take longer to do so!
For now, while the data still demonstrates a volatile market condition, we sit tight and remain conservative. In our opinion, we may see times that the market rallies and climbs, and this is normal bear market behavior when there are lower highs followed by lower lows when the rally does not quite seem as high or maybe as powerful, and then it declines once again.
Till we speak again, enjoy the warmer temps while they last!
Markets Up - And Volatile
WEEKLY UPDATE - JANUARY 7, 2019