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Thursday, 1 February 2018
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Marcus' Holiday Indicator

Going on holiday and the market falls over...again - It is uncanny - I am going for a weeks holiday tomorrow to Tasmania on Motorbikes and, as any long standing Member of Marcus Today will tell you, the market ALWAYS falls over when I go on holiday. It is proving to be quite a reliable indicator. Another reason to sell a few things (!), which I am doing this morning. Yes it may be wrong but I can always buy them back when I get it wrong. I have run up the cash levels on the MT SMA this morning by trimming some of the "Hot" stocks. I have done a small amount of pruning in the income SMA but nothing that has a dividend coming up (CBA, TLS). I didn't trim TWE which had good results today.

On the holiday thing...I abhor the use of past stock market statistics (stock market coincidences) as a basis for a future stock market prediction. Things like "the market always goes up in an election year" is a common US idiom. It is utter tosh of course and this sort of statistic mining is no more than an excuse for some under-inspired analyst to justify their salary whilst adding no value. In other words there is NO connection between my holiday and the market, don't worry...I know that. That legend started by the way in December 2007. I was going on holiday. Earlier that year I had ruined a holiday with my young family by stressing about the stock market. I had lost a week of precious moments with the kids and Emma with a mobile phone stuck to my ear. Idiot. I decided (actually...I was told!) that "Never again" would I ignore the family on holiday, and so it was that I told everyone in the newsletter, and the media, that I was selling everything before I went on holiday. As it turned out it was the top of the market. I didn't know that of course but everyone thought I did, and who was I to dispute such brilliance. By the time I got back in January the market was in GFC decline and, as a respector of trend, I found little reason to buy anything back. I should have written a book - "Why I sold everything before the GFC". I'm sure I could have filled 200 hundred pages with wisdom, and gone on book tour selling sold 80,000 copies internationaly. But, in reality, I could have explained why I sold everything at the top of the market in 5 words....it would have read "Because Emma told me to".

Marcus's Article in the Age and SMH today - I sort of think I don't need to explain what to do about the market falling today (and yesterday). I have written so much about it recently. Here are some recent articles that might guide you if you are worrying about a sell off...although the market seems to be taking it quite well this morning - only down 20 this morning...but then we fell 52 yesterday.

I think a correction is due in the US, but not a crash, the backdrop of co-ordinated global growth, low inflation, accommodative policy settings and solid corporate profits, is too good to lead to any sort of crash. But, from this overbought level, the S&P 500 could easily drop 10% without troubling the bigger uptrend. 10% would simply represent some of the froth blowing off, no more.

Our market is unlikely to suffer as much if it happens, because we are operating at low altitude by comparison to the US. The banks will likely outperform in any correction, as will utilities, infrastructure and REITs (as they did in the US last night). But I wouldn't be buying them. As investors focussed on total return not relative return its no good buying stocks that go down less than everything else. Cash is the only option if you expect the market to fall.

Noticeably JP Morgan has upgraded all the banks this morning. Well timed - the recommendation will appeal to institutional fund managers whose only focus is relative (not actual) performance. Yes this might be the time to rotate into the boredom of banks if the market is going to correct. But for individual investors who only want to make money not outperform, its better just to stand back, not switch.

RSI sell signal on the S&P 500 on the daily chart (short term):

But not on the weekly chart - and that sums it up - Traders likey to sell, nothing to worry investors yet.

This the same chart of the ASX 200 - not nearly so overbought and middle not top of the trading range. And no parabolic blow off to blow off.

 

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