The stock market has officially fallen into correction mode today. As of 3pm the Dow is down nearly 600 points and the S&P 500 & Nasdaq are both down around 2.50% – 3.00%.
Our Current Market Outlook has changed to “Market in a Correction” and our light is now “red”. As noted in our post on (10/04/18), the markets internals were already weakening last week and the uptrend was under growing selling pressure. That selling pressure has followed thru this week and has triggered a 3rd stage sell-signal in our 3 stage sell process. In response, we have been increasing the cash levels in 5 of our strategies to current levels ranging from 30% to 100%, depending on the strategy’s objective.
What to do now?
- Remain defensive and consider raising cash levels, perhaps by selling losing positions or by taking partial profits in stocks you own whose prices are in nose-bleed territory.
- Expect a violent price “bounce” in the markets once the first wave of selling has run its course. This type of price & volume damage in growth stocks and the popular indexes takes time to heal. No one knows how long or how far a decline may last, but an eventual buy signal of when to return to the market can be discerned.
- Build a watch list of strong sectors and the leading stocks in those sectors over the next several days/weeks. Keep in mind the old Wall Street adage that says “all boats float together in a rising or falling tide”. Simply put, most stocks follow the immediate trend of the market and very few buck the trend. The stocks that do buck the downtrend sometimes become the leaders of the next rally.
- Remain calm & hopeful. It’s hard to endure declining prices and falling account values, but in time a new rally will return and good money making opportunities will re-emerge.
As always feel free to contact us if we can be of any service. Have a Triumphant day! ®