Stocks Continue to Advance, But…
Last Friday I posted a handful of charts on my Twitter and Facebook page that suggested stocks are at an elevated risk of a pullback. If you are interested in viewing them, you can left-click the links above to visit those sites.
Even though risk is high, stocks are still in an uptrend. Below is a chart of the NYSE Composite Index and it has broken above its long-term downtrend line (red line) and has been trending up since Mid-February.
Market Breadth seems to be mixed and not providing any strong signals to the upside or downside. Advance\Decline indicators are showing stock strength while other breadth indicators are neutral. The breadth indicators that I have regularly highlighted in past newsletters are shown in the chart below. As you will notice they all have flattened out. However, the fact that these indicators reached such high levels suggests that we are not in a bear market.
Given that this rally is extended, I believe risk management strategies are paramount.
My way of protecting principal during times where stocks are trending up, but are extended, is by allocating accounts such that the overall portfolio volatility is low. In addition, I have logical exit points for each individual holding.
Many Bond Funds are still trending up with low volatility.
Client Update
Most Aggressive and Conservative accounts are invested in Bond Funds, and about 25% in a Money Market Fund which I will look to deploy in the coming day(s).
Craig Thompson, ChFC
Email: [email protected]
Phone: 619-709-0066
About Asset Solutions
Asset Solutions Advisory Services, Inc. is a Fee-Only Registered Investment Advisor specializing in helping the needs of retirees, those nearing retirement, and other investors with similar investment goals.
We are an “active” money manager that looks to generate steady long-term returns, while protecting clients from large losses during major market corrections.