It looks like the market is in the process of a normal pullback to its 50-day moving average. I’m not saying it will be straight down, but I think trading will continue to be choppy over the next 6-8 weeks. I reduced my exposure even more today and I’m going to wait patiently for a better risk/reward scenario. Here are a few points I would like to emphasize:
1) Please know your timeframe and do what works for you.
2) I’m not saying to short. Shorting is too difficult, and I don’t think the move will be straight down. I will likely be choppy, and nothing sustained to the upside over the near-term.
3) Don’t get too bearish. We’re still in a longer-term bull market. We just need a breather and a normal pullback. If it happens, I will be paying attention to relative strength and passing along the strongest ideas in the MidWeek and Weekend Videos.
4) The reason I’ve reduced exposure over the past few weeks is that a basket of growth stocks tends to correct more than the general market. It seems like when the S&P 500 corrects -5%, the Nasdaq Composite corrects -10%, and individual growth stocks correct 20-40%. For example, you can see it today in ARKK (which is a basket of high octane and highly volatile stocks). ARKK was down close to -4% with the S&P 500 down -0.59% and the Nasdaq Composite down -1.46%.
5) If you are inclined to trade, I suggest using lighter than normal positions, or even taking some time off during this upcoming seasonally weak period. The good news is that there will be another amazing power trend in the future (most likely in the 4th quarter) and I’m confident that I will identify it for you. In the meantime, please do your best to exercise patience and discipline.