Markets are still high heightened but not high volatility as the massive shift out of growth and technology and into value and cyclicals continues. Although the Dow Industrials and S&P 500 have seen very orderly, routine and modest pullbacks of less than 5%, the same cannot be said of the S&P 400, Russell 2000 and NASDAQ 100 which are down roughly 6%, 13% and 8% respectively. And there is damage being done, make no mistake about it.
Last Wednesday ended the bounce from the low I thought would be made on January 10 or 11. The stock market is now in the process of deciding if that was an internal or momentum low or if we are about to see a significant breach and more selling. On the surface it has the look of the former with another attempt at a bottom coming right here. We should know the answer by the end of day on Wednesday.
Many times during a stock market decline I feel the same question from folks with positions wanting to know if they should sell them or hold on. Unless I believe the stock is about to collapse which is something I have only forecast a few times in 32 years, my answer is almost always this. If you weren’t smart enough or deft enough to take action before or as the weakness began, I don’t want to compound the problem and sell emotionally without good reason.
Since last Wednesday, we sold GDX, TLT, small cap value, large cap growth, some internet, some biotech . We bought QQQ, EEM, mid cap value, Dow Industrials, more real estate and discretionary.
