FREDAlert!
Volume 10, Issue 1
February 6, 2018
The recent trading is finally provoking some consternation in the popular media regarding the stock market. While this is happening more quickly than we thought it might some review will throw some light on this. Recall we have said on conference calls that one of the first three months of the year should be a down month, and that it could be down 9% to 12%, which would ultimately put SPY around 251 to 254. We doubt that this will happen in the next few days and it may not happen at all. Often when % Bears on Investor’s Intelligence are low (and they are in the 13% range) you get this sort of flush. This is a bit more dramatic because of the amount of Dow points involved. We still think it likely that the SPY 260 area holds the first part of this decline. We would add some cash at that number.
What does seem likely is that the market will make a complex, and not a V bottom here, so we will hold the low volatility positions in our models for a while. Traders looking to switch out of that early (now) will do well ultimately but could see some issues in a couple of weeks if the market rallies and then retests or makes new lows.
We would buy some quality stocks in here: AAPL, BAC, BA are examples and should be decent trading vehicles as well as investments. Start investing – realize this should continue to be choppy and should make a new closing low over the next few weeks.