Virtually every model portfolio that we track...T2 market neutral, X Sectors, Commodities...even Bonds and Fixed Income.. are all showing downslope P6 and in most cases a penetration of the RSQ equity line. Under the pressure of equity selling we would typically expect the bonds side to be running green...that has not been the case and TLT's dramatic plummet on Friday (before a late recovery) is a sure sign that the market fundamentals are in need of a new paradigm.
The portfolios have incrementally gone to cash since April 15th and there's little evidence that the pattern is ready to exhaust. We're a long way from capitulation selling and this may turn out to be just another great buying opportunity. In the meantime however patience is advised just in case this is a delayed "sell in May' distribution that could have several hundred more points to the downside before finding a viable support level.
With all the sectors showing weakness there's little point in being vested...the only result is that we lose money at slower pace.
These turnarounds can be dramatic...and costly, if you're not paying attention. As an example here EWJ, the Japanese Index, which has given back 2 months of gains in just a few days. What's scary is that it may revert to $ 9.50, which would really be disappointing to investors who jumped on around May 15th based on several reputable money manager's recommendations.
It's well said that anybody can buy a stock (or ETF)....it's when you sell that counts.
