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« Portfolio Update | Main | Market Update »
Friday
Dec212018

Portfolio Update 

Our 10/50 indicator has crossed and confirmed negative today. 

As we mentioned in our Market Update on Dec 7th, our investment discipline provides an exit-strategy when an objective indication of a trend-change occurs.  Note our 10/50 chart below.

 

Simply put, the average weekly price of the S&P500 over the past 10 weeks is now worse than the last 50 weeks.  We identify this as our trigger to exit equities until volatility subsides and a positive momentum is reestablished.

In this century, the 10/50 has confirmed negative only five times before today.  On two of those occasions, the market suffered crashes: the tech bubble and subsequent attacks of 2000-2001, and the financial crisis of 2007-2008.  On the other three occasions, the market endured only a short season of volatility, then got back on track.  We believe this trigger provides an objective exit that is appropriate given recent history and negative possibilities.

Today we begin processing trades to exit equities until the trend reverts and confirms back positive.  The S&P500 is down 16.9% from its highs, but only down 8.9% for the year.  Our indicator has triggered an objective “stop” that we feel is suitable.  But whether the market moves further downward remains to be seen.  For now, we remain on the sidelines until volatility subsides and positive price-action is restored.

As the equities are sold in your account we will have the proceeds put into a money market account held in your Fidelity account.  Today that money market is earning approximately 1.9%.  If this market down turn continues and begins to appear to be a more severe correction we may, at some point, move these positions from money market to appropriate bonds.  But for now, we will have the funds in a money market.   

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