Sy Harding: My concerns about high market valuations, excessive investor euphoria, the Fed eliminating its QE stimulus, growing economic woes in euro-land and so forth, became more serious when my firm’s technical indicators triggered a sell signal on July 31.
As readers know, we had been cautious, expecting a 15% to 20% correction at some point, to a low in the October/ November time-frame. With the July 31 sell signal on the technical indicators, we put 20% of our portfolio in initial downside positions in inverse etf’s.
As is typical, we were early and took some grief as the market continued somewhat higher in August.
However, our intermediate-term indicators remained on the sell signal and we have added to downside and safe haven positions at the higher prices. Now the NYSE Composite has broken beneath its long-term 200-day moving average, and the sell signal is being further confirmed on the charts.
It is different this time than when so many previous ‘pullbacks’ since 2012 were only brief ‘buy the dip’ opportunities. The market is more overvalued, and has gone longer without a normal correction. The Fed has halted its QE stimulus that has been so important since 2009.
The economies of the major trading partners of the U.S. are slowing. Global markets, particularly in Europe, seem to be leading the way down.
But still, why sell and take downside positions if all we expect is a normal 15% to 20% correction, and then an important buy signal and resumption of the bull market?