In last week’s missive I specifically stated:
“The time has now come to start moving more heavily to cash. As I will discuss throughout this weekend’s missive, including the 401k-Plan Manager, it is now time to “OPPORTUNISTICALLY” REDUCE PORTFOLIO ALLOCATIONS.
As noted in the chart below, the markets are now once again extremely oversold. As I have often stated in the past:
“By the time a market signal is given in the market, the markets are very likely at a point of extreme oversold or bought conditions. Therefore, it is always better to use the subsequent relaxation of those extreme conditions to add or reduce portfolio exposure.”
This is why it is never a good idea to “panic” when something initially goes wrong.
With the markets now deeply oversold, it is VERY likely that the markets will bounce next week. The problem, for those with “buy and hold” bullishly biased strategies, is the “bull market” has now ended…at least for now.
As shown in the next chart, and confirmed by the above, is that a bounce from these oversold levels will run into a substantial amount of overhead resistance where the rally will very likely fail. THIS WILL BE THE POINT TO LIQUIDATE HOLDINGS.”
The chart below is updated through Thursday’s close.
