October 22, 2018
We are in it. As we said in our blog from 9/5:
“In the very short-term the trend is down and we still see risk of a similar event to the pullback earlier this year...”
Unfortunately, the old highs didn’t hold, and we broke down. Some technical damage was done as all major US indexes closed below their 200-day moving averages at least once (the Dow only once but the S&P 500 and Nasdaq multiple times).
As you know we define the 200-day moving average as the line in the sand between long-term bull and bear markets. Billionaire investor Paul Tudor Jones (PTJ) has famously said that if he had to choose only one indicator to use for the rest of his life it would be the 200-day moving average. While researching for this blog, I found this great interview – PTJ being interviewed by Tony Robbins in Tony’s book “Money: Master the Game”, where the 200-day moving average topic is discussed. We highly recommend the book.
Earlier this year, the market peaked on January 26th and tried to move higher almost immediately. It ultimately didn’t find its final bottom of the correction until May 3rd (using the S&P500 index). That means we could be in for 3 months of consolidation before we see any meaningful move in either direction. However, it is earnings season, and the holidays are approaching quickly so we could just as easily see a quick rebound to finish the year.
We’ve raised plenty of cash leading up to this correction, and we have continued to follow stops along the way. We’ve also taken opportunities to allocate capital to our best ideas – on sale. We will continue to follow this game-plan. It has served us well over the years – in all types of markets.
We’ll leave you with this thought: during the last 5 years of the bull market that ended in 2000, the S&P 500 suffered 7 pullbacks of 7.5% or more while climbing 147%:
SOURCE: MONEY.NET
Shane Fleury, CIO
Elevate Capital Advisors
Legal Information and Disclosures
This commentary expresses the views of the author as of the date indicated and such views are subject to change without notice. Elevate Capital Advisors, LLC (“Elevate”) has no duty or obligation to update the information contained herein. This information is being made available for educational purposes only. Certain information contained herein concerning economic trends and performance is based on or derived from information provided by independent third-party sources. Elevate believes that the sources from which such information has been obtained are reliable; however, it cannot guarantee the accuracy of such information and has not independently verified the accuracy or completeness of such information or the assumptions on which such information is based. This memorandum, including the information contained herein, may not be copied, reproduced, republished, or posted in whole or in part, in any form without the prior written consent of Elevate.Further, wherever there exists the potential for profit there is also the risk of loss.