With the Dow now having lost some 560 points over the past five trading sessions, concern about a slowing economy is catching up with the markets. I have touched on the apparent “disconnect” from a rallying market to the ever worsening Subprime/crisis before, just maybe some reality has finally sunk in.
While the “R” word (as in Recession) has now made it to front page news, at least a short-term trend reversal can be seen on our charts representing the domestic and international Trend Tracking Indexes (TTIs). We continue to be in a Sell mode for broadly diversified international equity funds/ETFs (since 11/13/07). As of yesterday, that indicator has dropped below its long term trend line by -3.60%.
Weakness has also spread to the domestic TTI, which still remains above its long-term trend line by +3.12%. Technically, this still constitutes a “buy” mode; however, I will not add any holdings at this time due to the possibility of more downside activity and the subsequent potential move into bear market territory. I suggest you do the same.
The markets continue to display great uncertainly and it pays to be conservative and only hold those funds/ETFs, which have not violated their sell stop trigger points. With a little more slippage to the downside, we could find ourselves in a 100% cash position very soon.
Comments 1
This years “Santa Rally” never seems to have materialized. No surprises there.
And it looks like the move from late November to about Dec. 10 was a suckers rally.
Ulli, you might be interested to add the fund SRPSX (ProFunds Short Real Estate) to your bear market funds statsheet. It has been around since late 2005. Of course it has been performing very well of late.
G.H.