In my quarterly letter to clients, I called this environment unanalyzable. I don't think there is a precedent for all the things that markets are trying to figure all at once including huge blanket tariffs, geopolitical hostility and now this business with Jerome Powell along with whatever else I'm forgetting.
Thus far, there has not been the whoosh down, I mean a true panic inducing decline that would have me get less defensive. This is something I wrote about a couple of weeks ago, that I was ready if it happened but it didn't. People were terrified in the GFC and the Pandemic Crash but I don't believe people are terrified now which makes sense with S&P 500 down in the mid-teens.
We've been having the same conversation here for months about wanting to be less volatile than the market or put differently, being defensively positioned.
There is no way to know when the current event will end. If the bottom was today and we start to go back up then I won't have bought the dip but the risk of down a lot is still present because we haven't yet gone down a lot. A 16% drop is not nothing but we've all been through much worse.
Down 25 or 30% certainly constitutes being down a lot regardless of where the bottom the gets put it. Buying low is very likely to work out very well the vast majority of the time and has nothing to do with timing the bottom.
That's worth trying to remember while we're still sort of in limbo, between down a little and down a lot. Buying panic, we're not there at this point, is very difficult but if you've done it even one time it should hopefully be a little less difficult.
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I'm looking for a Lowry 90% down day, followed by a 90% up day before I even consider getting back in. Alternatively, a series of 80% lows and highs might work too, but I have to check again what the rule here is exactly is.
Steve Strazza and a couple of other guys are talking about how it is a low signal (but beware the occasional double dip) when the percentage of stocks above their 200-dma goes below 15%, and then rises to above that level again. By that metric, we'd already have the worst behind us, which I just can't believe. Cue the obligatory words from Walter Deemer, "when the time has come to buy, you won't want to".
I guess we're just parsing every utterence from the Orange Man, and staring at the White House chimney to whether it's black or white smoke coming out. Oh wait...
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