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Sting Like A Bee

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Sting Like a Bee

Float like a butterfly and sting like a bee… there’s a lot to be said for having that approach in the Markets.

We can all hopefully see the Market is moving in a sideways mess at the moment, but let me start out by saying I hope this worst case scenario picture does NOT play out, and let me say also, that I very much hope the stock market carries on its merry way and we can all high five each other and blow kisses at each other on the way back to the moon and find beautiful entries on lots of stocks showing strength… but as the cautious human being that I am, and the kind of person who understands when it’s time to get defensive - I have 3 Charts for your consideration as I do believe there’s a lot more floating at the moment than stinging.

Exhibit A - Russell 2000

Russell 2000 23rd May 2019.png

Last year, I highlighted that Russell 2000 may be the index to get the “party started” when we were looking at a big market correction, and although it still has a little ways to go, this needs to be observed closely. The Small caps have rallied hard this year, but hasn’t got anywhere near to its previous highs in the same manner that the other indices have, therefore it would certainly seem logical, that if the bottom of the trading range falls away, the Russell may get nasty.

Exhibit B - S&P 500

SPDR S&P 500 23rd May 2019.png

1 of the most important indexes on the planet, flirting with key support levels, and with what I understand about support levels, if they keep getting tested, eventually something will give, and that certainly wouldn’t be good news… I’d imagine we’d see all the Armageddon headlines on CNBC / Bloomberg etc if breaks key support… definitely needs to be watched closely at the moment.

Exhibit C - QQQ

QQQ 23rd May 20192.png

Tech is obviously massive, and although it’s got a little ways to go, if 1 of the other indices break support, Tech won’t be far behind, so don’t be fooled by the ground it still has to cover… 1 of the indices can most definitely get the party started, and by the end of the evening, the house can look like a car wreck.

I truly believe that getting defensive ahead of time, and knowing when to get defensive can be a massive advantage.

The market doesn’t go up forever, and I think we just need to observe what happened last year to understand this, and I’ve no doubt there’s many of you reading this that wish you had got defensive ahead of time.

Hopefully for the rest of the week, we can see a rebound, and this blog will hopefully have wasted 2 minutes of your time, nothing would make me happier, but in the event the worst case scenario plays out… hopefully this has given a little food for thought.

I’m not saying we’re going to correct / crash again, and I’m not saying stocks will lose 60% of their value, but I take the view it’s easier to preserve capital than it is to replace lost capital.

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