I mentioned that the uptrend is in tact in my last article. What started as a 10% correction and a quick rebound has triggered a SELL signal for a BIG market correction. It will be as big as the ones seen in 2011, during the European Crisis and Japan Tsunami, and 2015, during the Emerging Markets meltdown and oil and gas implosion. The corrections during those periods were between 20 - 30% peak to trough. In some sectors, like the oil & gas, was -50%. It took around 1 year to recover the last high.
I don't think it will be like the BEAR markets of 2001, 2003 and 2008. The yield curve in the US did not invert this time so no recession is seen next year. In fact, the yield curve steepened. The pull backs are likely to be caused by high valuations of the tech sector, US and CORE Europe in general.
Looking at the MSCI World ETF, the current rebound is still well below the highs tested in Feb 18. Global equities are testing the 150 days exponential moving average in fact. It does not bode well and I would say there may be another 5% to 15% to go on the downside.
With that in mind I have started to short the European and US indices. I have sold those stocks that are well above 20% profit. It is better to hold cash than to hold on to stocks and watch your profits evaporate. I'm now only doing 13% per year return. That's 28% from Feb 16 to now. It's not a fantastic return at all but that is the weakness of momentum and value investing. You do very well when equity markets are on the start of a big jump. But at inflexion points, you do badly. I'm working to improve my system though by introducing counter-trend profit taking to complement momentum + value. This will prevent a lot of the drawdowns seen in momentum investing.
I don't think it will be like the BEAR markets of 2001, 2003 and 2008. The yield curve in the US did not invert this time so no recession is seen next year. In fact, the yield curve steepened. The pull backs are likely to be caused by high valuations of the tech sector, US and CORE Europe in general.
Looking at the MSCI World ETF, the current rebound is still well below the highs tested in Feb 18. Global equities are testing the 150 days exponential moving average in fact. It does not bode well and I would say there may be another 5% to 15% to go on the downside.
With that in mind I have started to short the European and US indices. I have sold those stocks that are well above 20% profit. It is better to hold cash than to hold on to stocks and watch your profits evaporate. I'm now only doing 13% per year return. That's 28% from Feb 16 to now. It's not a fantastic return at all but that is the weakness of momentum and value investing. You do very well when equity markets are on the start of a big jump. But at inflexion points, you do badly. I'm working to improve my system though by introducing counter-trend profit taking to complement momentum + value. This will prevent a lot of the drawdowns seen in momentum investing.
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