I am starting to feel a little queasy with all this up and down motion the markets have given us this week. As we close out a fun filled week of trading I wanted to share a few thoughts…
1) It ain’t over until the you hear someone singing, and not in the shower. I was looking at a chart today of the S&P 500 index going back to march of 2009. (see below) It is important to note the trendline is still pointing up on the long term trend. However, the emotions of the week has gotten to traders and they have been on the volatile side to say the least. Remember it is important to understand the time horizon you are watching and the overall objective of your portfolio and each position.
2) Dow and NASDAQ recover the support levels broken on Thursday. The importance of that is it keeps the upside in play, but the disappointment of that is stops were hit and those positions are no longer in the portfolio. Yes, that does lead to yelling, screaming, stomping and snorting about the reversal on Friday. However, if you didn’t have a risk management strategy in place on short term positions you could suffer more damages than you would like. Like anything discipline is important all the time not just part of the time. The outcome during the next selling period may be much worse and the outcome much different. Hindsight is always 20/20 and second guessing yourself only causes more harm going forward. If the upside confirms the bounce from Friday… you can always buy the positions back.
3) Bill Gross leaves PIMCO to manage money at Janus Capital. The headlines are big news for those who have been around investing for any period of time. The bigger question is will it make a difference to you? I don’t own PIMCO Total Return fund and therefore it is news that has no baring on my portfolio. If it does have a impact on you, deal with it accordingly. There are plenty of funds available with similar objectives and worst case he may have a new one at Janus. Enough said.
4) Technology (XLK) sector was the catalyst to the selling on Thursday. The break of support was noted in our update last night with the response of look for a follow through on the downside move today. That follow through was a bounce back to the break point on the downside. Thus, look to see how this trades out on Monday and if the downside is confirmed or if the sector puts together buyers to keep the previous uptrend in place. Bottom line… be patient and let this play out.
5) Consumer Services (XLY) sector broke lower on Monday, but has failed to recover the move below the 50 DMA. The long-term uptrend is still in play, but the short term has confirmed the downside move. Again, this is about time horizon and objective. Don’t confuse what is taking place short term with what is taking place longer term. The lack of confidence and clarity relative to the economy along with the Fed are weighing on the future outlook. Longer term heading into the fourth quarter which is consumer spending time, but this is one to watch relative to the time horizon.
6) Last, but not least, Nike earnings were great and the stock jumped 12.2% on Friday. Is this a sign of what to expect from the retail sector that is paying attention versus the big box stores? Retail earnings season has not been bad overall and there have been some bright spots. This is one to watch going forward, especially as we approach the holiday season.
Fun week if you like roller coaster rides. We are still within shouting distance of the sideways trading range we have been in for the last six weeks. The buyers were willing on Wednesday and Friday to buy off the selling on Tuesday and Thursday. The tug-o-war will continue next week and we will look for the best course to navigate the rough seas.
Have a relaxing weekend.