The market has had relatively mild declines over the last couple of summer and that it should happen again seems plausible especially how much ground was gained from November into the start of the second quarter. A hideous decline like in 2008 seems very unlikely because the market has only cut in half a handful of times over the last 80 years and a second time in four years and a third time in 12 years seems very unlikely.
No matter our opinion we will heed the 200 DMA. If the SPX goes below its 200 DMA we will take defensive action. It would not be aggressive to start because down a lot seems like a low probability but again we will heed the market as we have before (as disclosed in past posts).
The big macro here is avoiding the full brunt of down a lot. Down a little goes with the territory of participating in the stock market and so we are less intent on trying to outmaneuver a 5-10% decline (unless a move of that magnitude would cause a 200 DMA breach).
We are not at a point right here were defensive action is called for but in most past large declines (it wouldn't have to be a 50% decline to still be big), reducing small cap exposure or industrial sector exposure (depending on the type of account you have) has been a good way to go.
The picture; no we are not modernizing our fleet but one of our brush trucks is number 81.
10 comments:
My assumption is that a Hollande victory will result in an almost immediate reduction in bond spreads between France and Germany.
The bond market is quite aware, even if most of our pundits and leadership is not, that austerity measures in the teeth of an economic downturn significantly increases the risk of default rather than vice versa.
The equity markets may dance a jig for a day or two before they get the bond market's message. Such a flighty bunch.
NB: the outcome in Greece is probably going to rattle equity markets and the market for Greek bonds rather badly. Greece has already defaulted in all but name and now there is political cover to go all the way with it.
RW,
NB = latin for "nota bene" (note well)? take notice?
You use it frequently and I'm not sure what it means.
Anon 5:57pm, NB does stand for nota bene ("note well") although just "note" is probably more common in research and academic writing these days. I developed the habit of using it some time ago but the general intent is to add information or elaboration on a discussion or to introduce a side issue that bears upon or illustrates a consequence of the current topic without necessarily making it part of the main discussion.
I've probably gotten a bit sloppy with it over time, tending to use it as much to mark an addendum or errata as it's original purpose as an imperative to draw the reader's attention, but one of the few benefits of growing older is that it is easier to blame such lapses on dotage [g].
NB [g]: As expected the equity futures markets are not expressing confidence: Tomorrow's open is likely to be quite bumpy; hang on to your sombrero's.
sombreros? berets
Waddaya mean berets? Only cheese eating surrender monkeys wear those things [lol]
New French President Francois Hollande will officially take power on May 15 after ousting incumbent conservative Nicolas Sarkozy with tight margin. (I wonder if she has a model wife, too.)
sombreros as in cinco de mayo..
or sinko the market...
"stay thirsty my friends"
On another subject, do you mind telling us how much was raised for the new (1986) fire engine via your blog? Just curious.
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