Here is my take on today’s action, and I have also posted a chart on my blog displaying it. My long term timing system, which is based on weekly charts, so will not reveal itself until Friday’s close, still shows to be long. The huge jump in the bond yield is unquestionably the culprit in the recent drop. I also posted a chart a few days back showing how that looked at the time.
We are already at 2 standard deviations down in a big uptrend, so that is typically a good buy spot, much better than 2 std deviations down in a downtrend, which means nothing. Of the 5 stocks I bought at the beg of April, 4 of the 5 are substantially ahead, all by more than 10% and one is down 1%. They are holding up better than the mkt as a whole, which I why I bought them to begin with, I thought they would collectively.
I cannot add to my positions on this dip, because I am already so far above my entry, and I never pyramid upward, I put the full position on when I enter.
I expect the market to hold at these levels give or take a little bit, but if my model says to exit come Friday, I will do it on Monday morning. I doubt it will because several things have to happen, and one of them is very unlikely to move enough in just a few days to trigger the sell. My system which is longer term for stocks, does require sitting through retracements like this often. I probably have short term buys in my S&P system for tommorrow, but I have not run the program yet.
I have told my clients in the past as well as written about this pattern in stocks and bonds that we have right here, and it is bearish, make no mistake about it. However, often it goes on for several months before generating a big sell signal. This time could be different, but the commercials are still heavily long, and the seasonals still favor a move up, so I am long until my sell signal is generated.
It is of the utmost importance when volatility enters the market like this to keep emotions out of your trading decisions either way you are looking. I have been humbled too many times to get too carried away with my opinions, so I just follow my systems.
