Some calmness appeared to be restored to the markets although uneasiness remained after news that a bond insurer bailout will not be imminent. Much jawboning about the economic stimulus package supported the bulls, and the major indexes ended up on the plus side.
Both of our Trend Tracking Indexes (TTIs) remain in bear market territory by -0.36% (domestic TTI) and -7.90% (international TTI). I took the opportunity this morning to get out of our WASYX position since that fund, despite its tremendous performance, has began showing signs of cracking and is no longer bucking the down trend.
At the same time, I closed out our short S&P; position for the time being. With the tremendous market volatility and whipsaws of the past days, up and down trends seem to be no longer obvious, and my preference is to be safely on the sidelines.
While I believe that we are just in the beginning stages of a bear market, a view that is supported by my trend tracking indexes, it is also very likely that we will continue to see sharp rebound rallies, which will increase the likelihood of further whipsaw action. I am now left with some gold positions and small Swiss Franc exposure, which should be able to weather the storm. Depending on portfolio size, my clients are now anywhere from 85% to 100% in U.S. Treasury money market accounts.
This week has confirmed that there is no place to hide when the markets continue unwinding from the greatest credit bubble in history. There is no way of telling when the next shoe will drop, or who is even wearing it. The unwinding is far from being over, and I recommend that you read Jon Markman’s article “A bad market? You ain’t seen nothing.’”
This is not the time be a hero. If the trends change, and momentum figures improve, we will move back into the market, however, right now, it’s safety first.