Regular readers of this blog know that I suggested a correction was quite overdue about a month ago –I suspected that August might be the month to bring such a correction. Here is my July blog that covered this thought:
As I noted in July, August is one of the weakest months of the year, according to Thackray’s seasonal investing guide. September is also a month to watch—given its reputation as the weakest month of the year, seasonally speaking.
I view the current volatility as quite predictable and healthy – and at ValueTrend, we’ve positioned our equity platforms to take advantage of any weakness that arises. In late July, I followed my own advice and sold a little more equity. Our Managed Equity Platform now stands at about 25% cash. This cash dampens volatility, and provides capital to buy cheaper stocks in the current correction or flat/choppy period.
I view any choppy market behaviour over the next few weeks as constructive to the health of the market, and as a buying opportunity. The big picture bull market is still intact. Above is a chart of the S&P500 (red line) vs. the broad market Advance/Decline line ( blue line – smoothed with a 20 day moving average) – courtesy freestockcharts.com. As you can see, I’ve drawn green trendlines on both the S&P index and the AD line.
Despite the recent pullback, the trend is still our friend. In fact, the S&P 500 just bounced off of the trendline. I suspect we may have another test of that support level, which lies around 1900. Or we may just meander in the mid-1900’s for a while. Use any choppiness over the next little while to add quality positions to your portfolio.
Keith on BNN
I’m on BNN’s MarketCall Tonight at 6:00pm next Tuesday August 19th.
Phone in with your questions on technical analysis of your favorite stocks for Keith during the show. CALL TOLL-FREE 1-855-326-6266 on the day of the show. Or email your questions now (specify they are for Keith) to email@example.com