Market Gymnastics – Bouncing Markets And How To Navigate Them
Chart: SOXX 1-year daily
The markets sold off just as we had predicted, which should not surprise anyone after a very long stretch of positive weeks. We moved about $1.1 billion to cash and one-month T-bills at the beginning of the selloff due to several HCM Pivot Points being hit. This gives us a lot of buying power when the market turns back up. The intermediate-term trend, as identified by the HCM-BuyLine® is still positive, but has weakened, and we are monitoring closely. We believe the selloff has created many opportunities, and we will be watching for the HCM Pivot Points to turn back up so we can start buying some of them. One area of extreme interest is semiconductors (SOXX).
Chart: SPY 1-year daily
Seasoned traders also look for what is called a 50% retracement, and I have added a chart of the S&P 500 where you can see that it is getting closer to that level. We think there will probably be a few up-days followed by additional selling pressure before the market finds a place of support. The markets are deeply oversold on a short-term basis, so a modest bounce should most likely be coming. The market will take a little time to work through the technical damage of the current selloff, so don’t expect a straight shot back up, but rather a slow grinding process, which is healthy.
