I’m going start this short article with my usual caveat: nothing you read here should be taken as investment advice, recommendations or a solicitation to purchase any securities. What we offer here is for discussion, educational or entertainment purposes only.
That said, we’d all like to know with some certainty what the market is going to do in the coming days and weeks. Then we will all be really, really rich. Maybe.
A tool that I have noticed in the past marks bottoms quite well has been a joint reversal of the VectorVest MTI indicator and my Monthly IBD50 portfolio. For those who don’t know, the VV Market Timing Indicator (MTI) is a proprietary VV indicator which combines broad market price movement, momentum and buy/sell numbers. That’s a broad simplification, but you get the picture. The reason that the MTI coupled with a move in portfolio value direction works for me is because the MTI corresponds to broad market measures while the portfolio reflects the types of stock I’m likely to buy and their price movements — so it’s pretty specific.
If you’ve read my posts on the performance of the IntersectioNx list and the Stocktwits 50 Top-10 from last week I doubt it will have escaped your notice that there was money to be made last week, and in some cases, a lot of money (e.g., larger Chinese Internet stocks). So, what to do?
I am still very leery of this market in the intermediate and longer term. We had a Death Cross in the S&P 500, which rarely if ever augurs well for the market. And while current profits seem good enough, I do wonder if they will stay that way and if the overall weight of negative news will drag the market down for the next two to three months. Certainly there are values to be had in the market, although I do not share the enthusiasm displayed in Barron’s this week and I most certainly not going to follow their recommendation to buy BofA. I don’t the fat lady’s sung on their bad news yet. You’re hearing this from one who generally tends to a bullish disposition, by the way.
But….. that does not mean we will not see bounce in the market, and if we are of a mind, we should try to profit from it. Given the volatility out there and the inclination for the markets to move very fast, then this is not an undertaking to be taken lightly or with inattention. The chart above plots the VV MTI and three portfolio values I track for last week. You’ll see that the portfolio values led the MTI by generally heading North. The MTI reversed last Wednesday.
Under normal circumstances I want to see five business days of a consistent move off a bottom of the MTI and my portfolio values. If greed is your guide and you’re prepared to pull the trigger earlier than that, it may pay off for you, but I will wait and see, most likely. My initial shopping list will come off the Stocktwits 50 Top-10 and the IntersectioNx.
“Wait and see for what?”, you might reasonably ask. A solid move before I trade. As I write this at roughly 8pm Pacific the US futures are in the green, but not anywhere near excitement levels. That can change by morning, or even in the morning — intraday reversals have been fierce lately. I will load some moderate-sized trial order and save them, basically so I am ready to go if the market indications are right. But I am not planning for these to be long-term positions if they do trigger.
Understand that this is trading and is by no means investing. Don’t fool yourself if you are an investor not a trader. Being in cash for a few more days may not be a bad decision either.
Tread lightly until we see that the ground is firm. But be ready if the bounce continues and you’ll work for some short-term profits.