Volatility is beginning to ratchet down a little with the recent steady rise in stocks. All the moves have definitely been headline driven. Good news sends the market higher and, conversely, bad news sends the averages south in quick order.
Alpha Trend's Brian Shannon calculated the follow percentage moves in the S&P 500. I try to highlight the ups and down just as in his original illustration. Red shading is down and green is up. The moves are rapid and very big.
(Click on chart for easier viewing)
(Click your Window back button to return to this blog post)
(Click your Window back button to return to this blog post)
In addition to the crazy stock market, the higher quality bond market has been steadily declining. Junk bonds have been advancing as US Treasuries have been sinking.
If you have been tracking your account closely you are aware that we are close to 100% cash at the moment.
In August most US and world markets slipped into bear market territory. Huge rallies, such as the one we just experienced, are indicative of bear markets. Bulls markets see steady gains, periodically interrupted by minor corrections that generally recover rather quickly. In a bull market you can buy each dip with impunity. In bear markets you are best advised to sell the rallies.
Since August the market has established a new 100 point trading range at these new lower levels. In each of the last two attempts to breakout to the upside, the market advance has been thwarted by the S&P 1220 area of resistance. We will shortly see if a breakout is in the cards or if we merely head lower again. An upside breakout would suggest the beginning of a new cyclical bull market.
It is tough to sit in cash as the market is moving higher. After having shielded accounts from the recent large bear market sized declines, I don't feel the necessity to chase returns at this juncture. I prefer to wait for more clarity.
If the market moves decisively one way or another I am prepared to prudently begin re-deploying our cash.
.
No comments:
Post a Comment