Market Flash Back?

Whenever we experience a day with volatility & declining markets the mind quickly flashes back to the days, a few years ago, when banks were being bailed-out at a fraction of their former values and Lehman Bros. was suddenly referred to in the past-tense. Sure, there are negatives with regard to the slowing of the US economy however, I must objectively point out the positives that persist, and among them are the continued strong relative strength of the US equity asset class; it remains ranked #1 while commodities are #2, international is #3, foreign currencies are #4, fixed income is #5 & cash brings up the rear at #6.

We have experienced an exhale from the recent highs in indices such as the S&P 500, but we have not seen a change of trend. It is important to remain objective in the face of days such as these, particularly since recent memories encourage emotion-based decision making over objectivity.

In summary: 75% of stocks in the NYSE are currently above their bullish support lines, and the weakness has certainly not been evenly spread; the Banking sector, for instance, has roughly 50% of its components in negative trends and the Savings & Loan sector is even higher. Meanwhile Gas Utilities still shows 86% above trend, while Chemicals and Oil Service also have percentages in the mid-70s.

Yes, while volatility tests our nerves & resolve and the ‘talking heads’ banter about the current ‘hot topics’, we steadfastly apply a non-emotional and disciplined approach to managing your assets. Looking ahead, some of the recent headwinds, the spike in gasoline prices and disruptions caused by the Japanese earthquake and US tornadoes are likely to fade in the second half of the year.

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