The present correction is great news for the health of the aged bull market. In fact climbing the so called wall of worry is very beneficial for long-biased investors. In 2011 there was a similar scenario that went on for a month. It was a sideway consolidation between the first low in August and a re-test of that low about a month later. For now, there needs to be a validation of a move that takes the indexes clearly above their 100 day moving averages.
The recent swift 10% correction rattled a lot of investors and now the media needs to find an excuse for it. The best one they found is overreaction to China’s slowdown. In reality, it just the market’s way to deal with lofty prices.
When you have the Dow down 1000 points on an intra-day basis you have to know there are going to be institutional traders looking at the host of beaten down stocks who are ready to step in to do some buying. That happened on Monday 25th at opening. Chances are good that we will get some follow through buying which should help this new rally, as short sellers begin to cover more of their positions and money managers keep buying (particularly the first few trading days of the month).
Most times in the market, initial rallies come from short covering as the explosive reversals happen. After that, institutions continue to buy. Our last week’s move into the market at the last day of the meltdown was rewarded by a swift average gain of 4.5% in our US Sector Portfolio system, for a two day hold. This long trade was our move to take advantage of the seasonal effect of the market and the gain this time was exceptional because the market was so oversold. We then shifted our positions to our top sectors of choice in the U.S. market. The highest institutional buy volume is now going to these sectors: IYF financials, IYC consumer services, IYH healthcare, IYK Consumer goods.
Signal Pages Snapshots
U.S. Index Trader:
Canadian Index Trader:
US Equity Sector Portfolio
|Symbol||Sector||% of Portfolio||Entry date||Entry price (at close)||Dividends||$ Gain / Loss to date||% Gain / Loss to date||Action|
|IYH||Health Care||25%||08/27/2015||$153.82||–||$0.62||0.40%||Stay LONG|
|IYC||Consumer Cyclical||25%||08/27/2015||$141.59||–||$0.19||0.13%||Stay LONG|
|IYK||Consumer Staples||25%||08/27/2015||$103.46||–||$0.12||0.12%||Stay LONG|
US Bond Sector Portfolio:
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