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Market Correction Update

In The Highstreet Group by John Bartoletta

The current market correction has caused the general sentiment and opinion to turn much more bearish, which is common to see after a financial market pullback. This makes it especially difficult to tell if the market is making a low or not, as the news and market statistics are also in a pretty negative position, but all of that is also normal for a market that has had a substantial correction.

In the days since our last update when lows were made on August 24, the market has struggled to find its footing. We use the numbers and levels on the market to help in determining if a bottom is forming, and for the current pullback, the low of 15,350 to 15,370 on the Dow Industrials is the ultimate low that must hold. However, the two more recent bottoms around 16,000 are perhaps the more important support levels to watch as critical to stay above. Along with a resistance level around 16,660 (highs that have been hit on 3 separate days), a breakout through either the 16,000 or 16,660 level is a likely indication of the next meaningful market move.

TRADING UPDATE: In the meantime, now that the indexes are off more than 10% from their highs, we are looking to hold what we have and put at least some cash back to work into stocks as conditions warrant. At this time we are not seeing clear indications of what areas of the market may lead in a recovery, so a more general approach is best at this time.

We continue to hold cash levels of 30-34% that are limiting the portfolios to about 60% of the market volatility. The cash can be put to work quickly should we see opportunities present themselves and the hedge positions will remain a trading tool to improve risk exposure in the portfolios.