The market isn’t pretty.
All, told, at the time of this writing, the S&P 500 Index, excluding dividends, is exactly 0.26% for the year.
And this is August.
Which means that basically … the stock market is flat and has done nothing for … eight months.
What is a trader to do?
What is an investor to do?
This is a ‘raise cash’ period. But let’s be real. It’s been a ‘raise cash’ market for the last eight months. It’s always a ‘raise cash market’. But particularly so now. We have no idea if the market is in an accumulative phase, or a distributive phase in a flat market. In other words, for folks who are new … when the market consolidates like this large hands could be selling their stock quietly into rallies as they have a ‘distributive’ outlook and book their previous gains. Or conversely … all told … large hands could be buying stock quietly into dips as they ‘accumulate’. The best place to look for such clues is typically volume indicators, and they really aren’t giving much in the way of intimations.
When I look to pure price action (no technical tools … just the candles themselves), I see a lot of selling inside this channel for the last 18 days.
So what is a trader to do? What is an investor to do? Raise cash. If someone is a short-term trader, trade the smaller time frames. Since the market is up only 0.25% at the time of this writing excluding dividends … well … then …. collect those dividends! Every bit of them will pack on an advantage for the long haul. Our teaching ‘Sharpe Report’ portfolio? After that horrendous draw-down earlier in the year, we’re up on that account about 209 BPS, and I don’t relish the thought of losing those gains. So it is covered in almost either situation. Rates can raise, I would be ok. Convexity can hit the long end of the curve, and I could make out profitably. I’m covered if the stock market rallies, or if the stock market corrects.
In other words, I’ve covered my bases.
There are no predictions. However, this is what a market looks like right before it corrects.