The purpose of this update is to define exactly where we are on the market clock, because if we know where we are, broadly speaking we will know where we are going.

Last week the market plunged to arrive at the last ditch support level in the 1800 – 1850 zone on the S&P500 index that we had earlier defined as marking the lower boundary of the giant Head-and-Shoulders top. Once this level is breached, the full-on crash starts. Because it arrived at this support level in an even more oversold state than it was at the depths of the plunge last August, and because Smart Money has become bullish, it made it unlikely that it would break down and crash just yet, and sure enough the market has started to bounce, which means that the danger has probably abated, for now.

….continue reading HERE

….continue reading HERE

As discussed last weekend at length, the markets are currently exhibiting all the traits of a “correction action.” During these discussions, I have reiterated that you should not “panic sell” into the decline but instead take a disciplined approach to exiting the markets. To wit:

“I know as I write this, that come Monday morning my inbox will be flooded with emails asking if it’s time to go to ‘all cash.’

No. I NEVER suggest being in ‘all cash.’ From a management standpoint, this is never a good idea. Trying to ‘time the market’ is impossible over the long-term and leads to very poor emotionally based decision making. However, as I regularly write, it is our job to reduce portfolio risk to manageable levels to preserve capital over time. We can do that by increasing and reducing our exposure to equity-related risk by paying attention to the price trends of the market.

By the time the markets register important “sell signals” denoting a change from the bullish to bearish trend,the markets are generally oversold from the previous selling. This is, as shown in the chart below, always the case.”

….for more analysis and more larger charts go HERE

….for more analysis and more larger charts go HERE