Acumen Market Insights: Calling a BruntOctober 21, 2018
Timing is the hardest part of the stock market. Calling the bottom of any correction is never easy, but Acumen is using one of the indicators used by CMTs (Certified Market Technicians) to call a “brunt.” According to CMT’s indicator, the brunt of this correction is behind us. The indicator is called a “Swing Low” which happens when an index closes higher than the highest point reached during the previous day and usually signals the market has started a new uptrend. Both the Nasdaq 100 and the Semiconductor Index put in a Swing Low Friday, October 12th. This occurrence is significant as these two indexes have been leading the overall market for much of this long Bull Market. Their lead may be ongoing because the S&P 500, Dow, and Russell 2000 also put in their own Swing Lows with the market close on October 16th.
The chart below shows the Nasdaq 100 ETF with a blue line drawn at the closing price from Friday, October 12thwhich is the white candle third from the right. What makes it a Swing Low is no part of the red candle immediately to the left of Friday’s is touching the blue line. This is different than previous up days within the downtrend (like the white box three days earlier on Oct 9th). The close is higher than any point during the previous day. Even though the day after our Swing Low was still a down day, it wasn’t as bad and there seems to be an uptrend forming again over the last four days.
There are no guarantees in the stock markets, but we believe this is a good sign the brunt of the October correction is behind us and it may be a good time to be bold and add funds to risky assets again.
Acumen’s Portfolio Management Committee
QQQ is the ticker for the Invesco Nasdaq 100 index tracking ETF. The Nasdaq 100 is a stock market index made up of 103 equity securities issued by 100 of the largest non-financial companies listed on the NASDAQ. It is a modified capitalization-weighted index.
Semiconductor Index is a modified market capitalization-weighted index composed of companies primarily involved in the design, distribution, manufacture, and sale of semiconductors. S&P 500 Index is widely regarded as the best single gauge of the U.S. equities market. The index includes a representative sample of 500 leading companies in the leading industries of the U.S. economy. The S&P 500 Index focuses on the large-cap segment of the market; however, since it includes a significant portion of the total value of the market, it also represents the market.
The Dow Jones Industrial Average is a price-weighted average of 30 actively traded blue-chip U.S. stocks. Russell 2000 Index measures the performance of the 2,000 smallest companies in the Russell 3000 Index. All indexes are un-managed and an individual cannot invest directly in an index. Index returns do not include fees or expenses.
The chart and performance information contained herein is not a representation that such history or performance will continue in the future or that any investment scenario or performance will even be similar to such chart. The opinions expressed in this commentary should not be considered as fact. Information contained herein is not and should not be construed as an offer, solicitation, or recommendation to buy or sell securities. The information has been obtained from sources we believe to be reliable, however no guarantee is made or implied with respect to its accuracy, timeliness, or completeness. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to our individual situation. Comments concerning the past performance are not intended to be forward looking and should not be viewed as an indication of future results. Diversification does not protect against loss of principal.
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