Monday, November 12, 2012

Market Comment 11/12/2012

The market topped out in mid September. Since then the NASDAQ Composite Index is down nearly 10%. We are now sitting at a crossroads. Either we get a bounce soon or the floodgates open and the market accelerates to the downside.

At this point GWM Model portfolios are holding only gold, which has begun to show signs of life, and bond and flexible income investments. We are very defensive at the moment.

Better than 70% of the time, the market safely recovers from a correction that is limited to 8% or less. When a correction exceeds 8%, as it has now, it is really anybodies guess as to how much further the market could decline. A confirmation of increased bearishness would be a sharp rise in volatility; strangely enough volatility, as measure by the VIX index, remains relatively low.

Ian Woodward, market analyst and HGSI mentor, provided our group with the following historical study. It gives us the odds for various percentage corrections. It is a 35 years study of past corrections.

(Click on charts for easier viewing.)
(Then click the large white X in the upper right corner to return to the blog)

Percentage Corrections over 35 Years

Analysis by Ian Woodward
The market should bounce later this week. If it does not we have trouble right here in River City.

This blog post does not constitute an offer of investment advice. This blog is only provided for educational purposes. Please read the Important Blog Disclosure posted in the right channel bar. 

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