The tones and frequencies of my inbox are relatively good indicators of the behavioral side of this market. Some people are a little freaked out here. So, take a deep breath, and realize that what you are feeling isn’t unique.
The Bad, the Good, and the Relax lines (see chart below):
- Bad – two days ago, the SP500 broke our immediate term TRADE line at 1067; that’s not new
- Good – the SP500 has an immediate term TRADE line of 1049; that’s the same line I had in this morning’s note
- Relax – the intermediate term TREND line = 1017
TRADEs are what they are, trades. They are 3-weeks or less in duration. They matter.
TRENDs are much more dominant. They are 3-months or more in duration. They are very difficult to break.
Understanding that I only have a 6% Allocation to US Equities means I can probably be more relaxed here than the guy who got fully invested at the top of October 19th. But the fact of the matter remains that Mr. Macro Market couldn’t care less about my or his individual portfolio position.
As risk managers, all we can do is manage the risk that’s in front of us. From the lows of this morning (1054 on the SP500 as I type this), you have another -0.5% of immediate term TRADE downside, and another -3.5% downside to a fortified TREND line.
Relax, and wait for your price. This is not a crash, yet…
Keith R. McCullough
Chief Executive Officer