Most investors spend a lot of time wondering and worrying about the direction the market will go in tomorrow. The energy is misplaced. What the investor needs to now is what to do if the market moves in either direction. The chart below shows that the market has broken a long uptrend that added 26% to the S&P near it’s highest point. The discerning eye will note that it broke this uptrend 6 weeks ago only to resume it shortly. It is summer which is often weak for the markets and after a long run up many investors are expecting a correction and thinking that this decline will have follow through. We may get it or we may not. After all there are bright spots that would support a strong market such as; July ISM was 55.4, up from the prior reading of 50.9; The Philadelphia Fed report showed a reading of 19.8 up from 12.5 in June… So what is the answer to the unknowable? The answer is to know what to do in either situation. If you own a stock that is continuing to go up even though the market may be declining then let it go up and use trailing stop losses. If your stocks are declining you can have stops in place to take you out of the position. This way you are prepared for whatever the market brings.
Enjoy your summer and feel free to call or contact me with any questions.