Coming into this week, I continued to discuss the themes of patience and letting the market prove itself. Although we got through the seasonally weak months of August and September, we still need to see better health before we can get aggressively involved in the market again. Specifically, we need to see the big institutions coming back in with consistent upside volume. In addition, I would like to see a follow through day, the major indexes regain their key moving averages, and stocks build new bases again.
All of this will take time to develop, but we also have to be open-minded that higher interest rates will continue to be restrictive on the consumer and the overall business environment. So, what do we do? Remain defensive and patient until we see market conditions improve. Today, I reduced exposure by selling my positions in CELH, NVO, and LLY. If the market continues to see distribution, and the S&P 500 does not find support around its 4200 level, I plan to reduce my exposure even further.
As always, what you should do depends on your timeframe and overall investment objectives. Also, keep in mind that you can reduce partial positions, especially if you have trouble making decisions. Like I always say, “know thyself!” If you struggle with these decisions, you can always use the general guidelines of reducing any positions that are below their 10-week moving averages, and my hardcore line in the sand is the 200-day moving average. Also, if you are going to initiate any new positions, please keep them light to help protect your capital and your confidence. I will discuss all this further in Wednesday’s MidWeek Video.