We constantly monitor the major sectors of the market by tracking the performance of the ETFs that represent those sectors. We subdivide the watch list into two main categories titled: Market WatchList and Global WatchList.
The Market WatchList and the Global WatchList reflect the rapid deterioration in market conditions. Although most of the sectors in Market WatchList are not in well-developed downtrends, most have completed a topping pattern and have formed a pattern of declining peaks with RSI-14 below 50. Most of the foreign ETF's that make up Global WatchList are already in well-defined downtrends. Please keep in mind, however, that my comments and trend analysis in the domestic and global watch list are not meant to be predictive, but rather, are just observations of the current situation.
Not only does the Market WatchList reflect significant market deterioration, it also reflects a substantial reshuffling of relative performance. The top groups on this list are now Precious Metals, Muni Bonds, and Treasury Bonds. These are defensive groups that investors typically move into when they perceive risk to be high. The bottom three groups on this list are Europe, Foreign Diversified and Latin America, reflecting the same broad weakness in foreign funds that we have observed in the Global WatchList for the past several months. I still see nothing in the charts that would suggest it is time to consider foreign funds.
The rush to these defensive assets will more than likely subside as risk aversion wanes. Gold, however, is definitely in a bull market. Due to its high level of volatility gold may only be suitable for clients capable of tolerating the associated risk.
If you want a position in gold investments let me know; send me an email or call.
RSI 14 - Relative Strength Index - RSI
What Does Relative Strength Index - RSI Mean?A technical momentum indicator that compares the magnitude of recent gains to recent losses in an attempt to determine possible trend reversals as well as revealing overbought and oversold conditions of an asset.
A reading below 50 indicates that a change of trend may be at hand.
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