The stock market dove deeper into correction territory today as a good EPS release from bellwether Boeing wasn’t enough to cause the market to takeoff. Our Current Market Outlook remains “Market in a Correction” and our light is “red”. A hallmark of a weak market is one that opens up nicely but then reverses during the day and closes down sharply. That technical pattern has been on full display lately. That is an institutional distribution characteristic. As we posted on (10/10/18), the market fell into a correction and its current direction is downward. That trend remains and so far stocks have shown very little in the way of developing any technical strength. Our five equity based strategies have current cash levels of 48%, 50%, 60%, 70% & 100%. For now, we believe one of the best short-term assets for an investors portfolio is still cash.
In the days/weeks ahead we will be studying the markets daily internals looking intently for 4 specific technical events to reveal when the “footprints of money” begin to seriously come back into the market. Currently, only one of those technical event signals has happened and it may be foreshadowing a violent several day upward bounce in the very near future. One October rally attempt already failed yesterday as the Nasdaq & the S&P500 undercut the rally’s previous low.
When studying the technical internals (the “math of the market”) to identify when a meaningful new rally attempt may develop, there is a sequence of daily price and volume action that can indicate when a potential bottom is in. As that sequence develops, and while the aforementioned 4 specific technical events would be falling into place, our Current Market Outlook would improve to yellow, and then to green. As the market rebuilds its strength, we redeploy capital in phases into the emerging, stronger sectors and the companies that lead them. For now, we are refreshing our watch list with companies that are displaying excellent relative strength versus the general market. We suggest you do the same and do not become discouraged.
As we stated previously, no one knows how long or how deep a correction will last. For most investors it is extremely difficult to remove their own emotions from the process of discerning when to begin putting their money back to work in the market. (Not to mention where to put it.) Our disciplined, time-tested mathematical approach can remove that obstacle and allow for objective investment decisions to be made in step with the smart money crowd. That’s why you hire us. Have a Triumphant day! ®