Is this the end of the choppy market?

September 5, 20199 Comments

Don and Jon Vialoux note in their “Timing the Market” report

“Before the summer comes to an end, more volatility may be in store. September has been the weakest month for equities, on average, over the past 50 years. The S&P 500 Index has shed an average of 0.7% with only 44% of Septembers showing a positive result. Returns have ranged from a loss of 11.9% in September of 1974 to a gain of 8.8% in September of 2010.”

It seems to me that, seasonal tendencies aside, there are plenty of other reasons for continued gyration on the markets out into October. As I noted on my blog last week  – there is a tendency for the markets to react strongly to the US President’s tweets and updates surrounding the trade deal with China. Today, the market is celebrating an announcement of a meeting date between trade officials on both sides of the deal. Earlier this week, the market was spanked as China instigated some new tariffs. Its hard to keep a level head through all of this noise.

I can’t tell you what will happen with the trade deal for sure – but I do have a strong opinion. As you may have heard me say in the past – I don’t know when it will happen. But I do feel it will happen….and quite probably before Trump enters into his pre-electoral campaigning in the early part of 2020. After all, its a symbiotic relationship between the two parties – they each get value out of keeping a trade relationship. Moreover, Trump bills himself as a deal maker. Its a win-win if he cracks a deal, but its a no-win if he doesnt get something done before his campaigning ramps up.

Politics and crocodiles aside – the charts are pointing towards further consolidation. Yes, today we can see a neartermed breakout out of the very neartermed consolidation we’ve been stuck in for a month. Next resistance on the SPX lies at the end of July highs around 3025 or so.  Will it crack? Perhaps. But a tweet can reverse that bullishness quicker than the Leafs hopes at making it to the play-offs. Ouch.

I’ll blog on the Bear-o-meter standings next Monday. Stay tuned for that one – its an important one.

Limit your risk in a choppy market

Sometimes I like to make a point of reiterating ValueTrend’s policy of maintaining a lower volatility equity platform than the markets. When managing with risk control as the top priority, this can sometimes lead into below market returns during irrationally exuberant markets. But, it also tends to lead into better than market returns in a choppy or bearish environment. Such is the case of late – click here to see our latest performance numbers. Our Equity Platform and Income Platform earned  positive returns amidst a bearish (-1.8%) return on the SPX and almost flat TSX return in August.

If you follow this blog and use Technical Analysis as a tool, I wouldn’t be surprised to hear that you had similar results. Our stance, which has been discussed on this blog in recent entries, has been to focus on defensive sectors and cash over the past few months. This seems to be paying off…. hopefully for you too.

Please feel free to forward this blog to your friends and family who may not be faring so well in the current investment climate. Encourage them to read it and follow us on Twitter (@ValueTrend).  They’ll benefit from the same insights that you get from the blog, and they will have you to thank for the introduction!

 

9 Comments

  • Hi Keith,
    George Weston hit $110.00 today. Is it still a keeper or would you take profits?

    Thanks,
    Barry

    Reply
    • Hi Barry–disclosure: I own the stock in the VT Equity platform and (because I own all the models personally) I own it personally as well.
      That out of the way–it does have resistance here. I’d say that if it can bust this level, the $115-118 area is do-able. We are still in it. If you are nervous, sell. If you think earnings will continue to support the stock, hold. I’m inclined to hold it for the month of Feb. because its a defensive name. But, I can’t advise you with too much clarity as I don’t know your risk tolerance etc. I am keeping an eye on it. If it fails here and moves down by $3, I might sell. Hope that helps.

      Reply
  • Hey easy on the Leaf bashing, at least weight till the season starts! Lol

    Carey

    Sorry I know this is not the right forum for this but since you brought up the topic of sports and I know you cycle: not sure if you are aware of “Zwift” , it is a virtual riding/racing community. I have been using Zwift for a couple of years. It is great for winter time training. You might want to edit out this paragraph.

    Reply
    • Carey– I do ride on Zwift in the winter–I follow a training routine during the week on my own (still on the trainer but usually just focused on intervals at certain power levels) — and then do a “long” ride on zwift usually on weekends –this, come October when the weather gets too lousy to ride outdoors. You can look me up–its under K Richards on zwift. As the race season approaches in the late winter I also do the odd Zwift race on a Saturday morning to start to sharpen the sword. For now–I am riding outdoors until the weather changes.

      Reply
  • Seems everyone is expecting spx to tank and the obvious bear flag was flying. However it appeared sentiment indicators were already in the fearful range

    Reply
    • Overbought, but still mid-long termed bullish. Current pullback was expected. Find a support point if you wish to add to your position. Be patient!

      Reply

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