Friday, January 10, 2014

Market Wrap - week ending 1/10/2014

This week the market moved sideways with very little gain.  The market started the New Year with 3 sharp down days of approximately 1% and has since stayed within that 1% level … We have not fallen below that 1% and have not been able to get above it.  There was some concern that investors that have been in the market for more than a year would start taking their profit off the table creating the start of a correction, but so far except for those first days, the market has been consolidating in a very orderly manner.

Volume has been quite high, which tells me that indeed there is lots of selling going on, BUT … obviously there is an equal amount of buying going on or prices would be dropping.  So for now the market is holding up nicely and the decline that started on the first day of the year has been totally contained.

As you know, we implemented a small but critical change in “the One” strategy that has kept us in the market this week.  We rolled out this change on the first day of the new year and as a result our exposure immediately went from 0% invested to 30% invested, and we have remained there since the first trading day. 

Although we added this new component to the strategy, the actual core strategy had not fundamentally changed.  It gets the same buy and sell signals as before, what has changed is that there is a new ‘trigger’ or ‘switch’ that forces us to stay invested regardless of what the other signals are saying IF and only IF the volatility is not out of the norm.  So, if the market is acting in a relatively calm manner (as it has been over the past two weeks), we will not go to a full cash position even if there are other warning signs.  But when a real correction finally arrives (as it will), this volatility switch will trip, allowing us to exit the market and be protected from the bulk of the decline.

This change specifically addresses the whipsaws that happened this past year, where we would see weakness and
defensively move to cash, only to see the market stabilize and continue higher, leaving us in the dust.

So, although we still see warning signs, we remain partially invested.  The market is definitely overdue for some kind of correction, but as I’ve mentioned in the past … market tops can take months to form and so we remain invested with our volatility triggers protecting us for when that time comes.

Hope you have a wonderful and safe weekend.


Randall Mauro
Resnn Investments, LLC

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