Market trend breaks down –again

After a year long down cycle and losses of more than 40%, world market trends turned tentatively positive at the end of October and suggested weeks or months of at least interim rally. Responding to this evidence, we took a small entry position in the broad market in Canada and the US(hedged). What happened next was that the trend broke down again this week and we sold.
Often a trade like that will stay in play for a few months. This time it broke down really fast.
The trouble with the financial news and economic data is that the market will turn long before the data. So if we were to just react to the news or how we or our clients feel about things, we would be of no value as a service. The rational approach is to measure and count the actual money flow and respond tactically to the evidence as it comes.
For now, we are content to remain out and watch carefully as the markets search for its next support level.

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9 Responses to Market trend breaks down –again

  1. Anonymous says:

    Hi Danielle, are you in anything during these volatile times, or strictly in cash?

  2. Anonymous says:

    We have balanced accounts so fixed income is a separate component, but for money that is earmarked for the growth side, cash and tbills is the place to park.

  3. Anonymous says:

    Danielle is it possible that you should have stayed in earlier this week. With the reverse second shoulder today, bouncing off prev.lows it looked like a nice day.

  4. Anonymous says:

    Hi, what do you make of the crazy end of day bounce? I would have to think it has more to do with computer programmed buying triggered by the Dow breaching 8000 again, and the resultant herd mentality of not 'missing out' then any real reason worth reading too much into. I would have to believe that these gains will probably evaporate again before too long (maybe within a day or two). I would be interested in your take on this as I feel you are one of the only experts who doesnt have an angle and is worth listening to these days.

  5. Anonymous says:

    Danielle
    A 10% swing in a few hours, that is the average equity gain in two years, unbelievable.
    I believe at this point, the fundamentals do not matter, they are all bad.
    The markets seems to be trading on technical's.
    Will be buying tomorrow and be trading in the range from the high Nov. 5 to the low Nov. 13.
    The low today on the US/CA indexes should be strong support.
    That's my plan for these crazy times.

  6. Anonymous says:

    George W. spoke today. Markets were down until the prez opened his mouth. I watched the indices go up as he talked, reassuring his listeners that he’s a “market guy” committed to protecting the current system from excessive regulation. By the end of his pep talk INDU was a couple hundred points up and the momentum continued until the closing bell. (Actually not a bad speech, take away the mannerisms and the condescending tone with which it was given.) The late day rally may have been at least partly sparked by the message. I watched my HXD gain 5 bucks until W rained on my parade, stole my gains and then some… I really do wish these politicians would shut up and let the markets work.
    Marcus

  7. Anonymous says:

    I think it was reaction buying in the hope that the lows would hold. We will see more at the close today. D

  8. Anonymous says:

    Danielle,
    What was the hedged position you put on and how big was it relative to the portfolio? What was the specific entry signal that led you to dip your toes in the water outside of the extremely poor market sentiment?
    I've read your book and I'm interested in your techniques, but I still feel like I'm in the dark since you rarely give concrete details on your trades and positions. Any further insight would be much appreciated.
    -Ryan

  9. Anonymous says:

    R, in our managed client accounts we use ETFs and have very defined rules about allocation and trading points. But I simply cannot give this to the general public sorry. In general I do suggest that people keep a constant weight of their portfolio in the highest quality fixed income from 35-70% depending on the person. And for the growth side of accounts, I suggest that people stay clear of individual stocks, sector specific funds or leverage. Just using broad market indices during an expansion and then moving to cash with the growth side of your accounts in anticipation of the contraction phase will work much better over the full business cycle than most other high risk, high fees plays. Its controling your risk exposure and behaviour that are most key.

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