Consider Taking Some Profits

Market Direction: BULLISH alert issued 11/10/2016 

Consider taking profit or monitor positions held very closely. This is the first time the stock market has shown considerable weakness. The stock market has been relatively robust for the last 20 weeks since president Trump won the election. The stock market can't always go up some type of correction is to be expected sooner or later. What’s next...

What happens after the stock market suffers a sharp drop for the first time following a protracted period of quietude? That is precisely the question Wall Street investors may be pondering after Tuesday’s downdraft—the biggest daily decline for the U.S. stock-index benchmark since Oct. 11—resulted in the end of a 109-day streak of days without decline of at least 1%.

Read: Blame options expiration, not politics, for stock-market pullback: analyst

Strategists at Bespoke Investment Group ran the numbers on returns for the S&P 500 SPX, +0.19% going back to 1928 following a period of 100 days or more without a 1% decline. The data group cited only 11 such instances in which trading without a down day hit the century mark, and on average during the week, month and three months following the first decline during those periods, the broad-market S&P 500 tends to end higher.

Check out: Survey sees bear market for stocks if 10-year Treasury yield hits this level

For the week, the average gain is 0.65%, advancing 8 out of 11 times. The average return after a month is 2.34%, with returns positive in 9 out those 11 occasions. After three months, average returns are about 2.44%, boasting gains in 8 out of those 11 periods (see table below).

To be sure, those statistics may offer no solace (and no guarantee of future gains) to investors fretting that the wheels may be coming off the equity train that has been powered by promises of fiscal stimulus from President Donald Trump. Anticipated delays in his health-care overhaul has led some to fret that the slog toward implementing pro-business policies, including deregulation, tax cuts and infrastructure spending could be longer than initially expected.

But it isn’t exactly clear, beyond lingering concerns about lofty stock valuations, what set off a sharp tumble in stocks on Tuesday, which saw the Dow DJIA, -0.03% fall 237 points, or 1.1%, to end at 20,668, the S&P 500 sink 1.2% to close at 2,344, and the Nasdaq Composite Index COMP, +0.48%  to suffer a 1.8% drop to finish at 5,793. Broadly, it was the worst daily drop for the benchmarks in months.

To many, the market selloff was overdue. But it is hardly anything to write about because as Salil Mehta, a graduate school finance professor, who has worked at Georgetown University and New York University, has noted, stock markets normally decline by least 1% once every 6 sessions.

The four-month period without a drop for the Dow and S&P 500 was uncanny and historic, but may provide some brave souls with buying opportunities, while others wait for the next shoe to drop.

Also read: Here’s the latest sign that the ‘Trump trade’ is losing traction

 

$tockMarketDirection proprietary model is currently BULLISH. We strongly encourage you to monitor positions closely, exercise proper money management strategies and follow us at $tockMarketDirection for ALERTS we may issue advising a change in the current market direction. Stay tuned and follow us. If you have a testimonial or comment of how this website has helped you we would like to know, email us. Share with a friend.

The all-time highs since our initial recommendation to go LONG this market. Here is how the markets have performed:

Stock Market Direction Recommendation (11/10/2016)
Dow	up 2,361.23 points a 12.55% gain	3/1/17
Nasdaq	up 719.26 points a 13.81% gain	3/21/17
S&P 500	up 233.50 points a 10.77% gain	3/1/17

Related Link: http://www.stockmarket-direction.com/