Short-Term Downtrend In Place
A short-term downtrend started September 25.
I had already trimmed quite a bit of my holdings of growth stocks in anticipation of the turn lower, but then during Friday's session it didn't seem as though I had trimmed enough, so I trimmed a bit more and I added a few shorts as a hedge.
Now, it is too late for me to do much more selling or shorting. So, I have to watch and wait to see how this short-term cycle plays out, and to see how it sets up in the weeks ahead for the next market uptrend. I suspect a few of these beaten-down growth stocks will be back in my accounts sometime in late-October.
I haven't been doing very well in this market since the big growth stock sell-off that mysteriously started out of the blue on Monday, Sept.9. So I am hoping with this current short-term cycle that I can get back in sync with this market and start making some money again.
It's not that I am a big money-grubber. It's just that if I am going to spend this much time watching and trying to understand the market, I want to be successful at navigating it.
So when do we start looking for opportunities to buy stocks again? Who knows, but maybe this chart below is a very rough guess. It looks like it will be just about when third-quarter earnings are being reported. I'll be buying the stock names that pop higher on good earnings and relative strength.
The longer-term outlook appears to be improving although it's a mixed bag.
Last week I showed that Industrial Production showed some surprising strength, and now the ECRI index is showing some strength too. In addition, the ECRI said this week that their cycle indicators are improving for Europe, and they specifically mention improvement for Germany.
So, if the ECRI index pops up above the zero-level next Saturday, then the caution flag comes down off of the long-term outlook, and the "weak, muddle-through growth" flag is raised yet again.
I think growth stocks love muddling economic growth, so that makes me even more confused about the big September growth stock sell-off. I guess it doesn't matter, though, because I will be putting my funds to work in the quality, leading stocks, and I won't worry about whether they are considered growth or value.
While on this topic of the ECRI, I should also mention that they see continued weakness in Japan due to weak exports to Korea and China. Of course, a weak Japanese economy isn't positive for the global economic outlook, so this just adds to the confusion.
Here is a chart for the bears. Biotechnology appears to be breaking down.
Another one for the bears. Technology could be ready for a price pullback.
The outlook for bond prices continues to point higher (yields lower).
Outlook Summary
The long-term outlook is cautious as of May 18.
The medium-term trend is up as of Sept. 4.
The short-term trend is down as of Sept. 25.
The medium-term trend for the price of bonds is up as of Nov.16 (prices higher, yields lower).
Investing Themes:
Large-Caps, Home Building, Defense, Utilities, Water, Dividend-Payers, Insurance, Semiconductors, Consumer Goods
Strategy During a Bull Market:
- Buy large-cap stocks and ETFs at the lows of the medium or short-term market trends
- Buy small-cap growth stocks on breaks to new highs in the early stages of market trends
- Reduce buying when the market trend is at the top of the range
- Take partial profits when the market uptrend starts to struggle at the highs
- The cardinal rule is never invest based on personal politics because the stock market can do well regardless of which political party is in control
Disclaimer: I am not a registered investment advisor. My comments above reflect my view of the market, and what I am doing with my accounts. The analysis is not a recommendation to buy, ...
more