Based on the action of last Friday and today, our proprietary risk management discipline has flashed a 2nd stage “sell signal” and is very close to changing to a “red” light (a 3rd stage sell-signal). Our equity strategies are holding up well relative to the market due to recent proactive moves made by us for our clients to increase the cash levels and/or employ a portion of capital into inverse (hedge) ETF’s. (See 01/18/18 & 02/01/18 posts below)
Today the markets suffered through their biggest single day point decline in history; a (-1,175) point loss on the Dow Industrials average. The big point loss amounted to a decline of 4.6%. To many investors it was the largest decline they ever remembered seeing. The fact is, that while it was an ugly & significant decline, todays percentage loss on the Dow barely made the “Top 25” single day rankings over the past 58 years. In fact, our research shows it came in 25th. This comment isn’t meant to minimize the losses, they were serious, but it is offered up to remind investors that sharp declines are a natural part of the long-term, stock market investing process.
Many investors are wondering what will happen next? Tomorrow (Tuesday) will be an important & telling day. The technical evidence points to more selling pressure & lower prices still ahead. The market is acting as though something negative is developing “under the surface”. As a result, we continue to employ defensive tactics in the risk management of our strategies and we will continue to do so until our indicators signal a healthier market environment has returned. While some sort of a bounce can be expected soon after such a quick rout, investors need to be patient to let this sell-off run its course. Proactively, we will use this sell-off to diligently scour the market for companies and sectors that are holding up better than most, as this type of stronger action often leads to future market leadership after the selling pressure diminishes. Will the bulls step in and “buy the dip”? Or will the bears emerge from their winter hibernation and maul stocks lower? Buckle up & stay tuned.
Have a Triumphant day! ®