IBD declared the market has moved to under pressure from confirmed uptrend. We have moved to this a couple times since the election, like after brexit, but I we have not had a declaration of “market in correction”.
For the stocks on this board, we will generally see a number of them move much more than the market - in both directions, so that is what you get here. You just need to know this is a system, and if you believe in the system you don’t sell if nothing fundamental has changes. Saul is 100% stocks all the time. He will reallocate small or large amounts throughout the month. His success is partially due to being “non-human” in times of big moves (up or down). He trusts his research and tries to not be too overweighted in one position. When a great position (A) goes down 20% in the market and another (B) only goes down 10%, he is likely to sell some A and buy some B. Many people are likely to just sell both.
We have had a long run. We often get a dip in summer, this mihgt be it, or not. “sell in may and go away”. Nov-April beats May-Oct over history. The high optimism in Trump reforms may be fading until a real tax bill is passed.
You might be tested. Do you have a system that lets you sleep at night when there is a 10% correction, or 15%? If this system does not do that than you should not be in it because you will sell at the wrong time. Visualize what you intend to do if you stocks go down 15% or 25% over the next month. Write it on paper. When you panic and change you mind, go back and read what you wrote. *FYI, I love Evernote for tracking anything I want to remember, I recommend checking it out.
Despite the fact that there are still only 3 distirbution days for S&P and Naz, IBD moves to “under pressure”. Those following an IBD “Growth” spec system will now have an abundance of caution. Buy fewer breakouts. Sell even sooner than the 8% max loss. Be quicker to sell at a profit before they go negative.
Although the number of distribution days remained low, the intense selling in many leading stocks was troubling. Because of that shift, IBD’s market outlook has been downgraded to uptrend under pressure. This requires investors to be quicker in taking profits and watching sell signal carefully.
Then too, chips and megacaps have been rising long enough to spark profit-taking. But complacency also might have played a role. The CBOE Volatility Index, a fear gauge, on Friday hit the lowest level since 1993
The one-day plunge in chip stocks isn’t a rarity in this uptrend. On Dec. 1, March 21 and April 28, the chipmaker group suffered losses of 3% to 5% while closing near the bottom of the day’s range. Each time, the group resumed its rise.
That won’t happen forever.
This could be one of those short dips, or a real correct that the market needs. Does not matter. If you have a system, review your rules and decide what you will do if poop hits the fan.