Market Notes

October 22, 2018

We are in it. As we said in our blog from 9/5:

“In the very short-term the trend is down and we still see risk of a similar event to the pullback earlier this year...”

Unfortunately, the old highs didn’t hold, and we broke down. Some technical damage was done as all major US indexes closed below their 200-day moving averages at least once (the Dow only once but the S&P 500 and Nasdaq multiple times).

As you know we define the 200-day moving average as the line in the sand between long-term bull and bear markets. Billionaire investor Paul Tudor Jones (PTJ) has famously said that if he had to choose only one indicator to use for the rest of his life it would be the 200-day moving average. While researching for this blog, I found this great interview – PTJ being interviewed by Tony Robbins in Tony’s book “Money: Master the Game”, where the 200-day moving average topic is discussed. We highly recommend the book.

Earlier this year, the market peaked on January 26th and tried to move higher almost immediately. It ultimately didn’t find its final bottom of the correction until May 3rd (using the S&P500 index). That means we could be in for 3 months of consolidation before we see any meaningful move in either direction. However, it is earnings season, and the holidays are approaching quickly so we could just as easily see a quick rebound to finish the year.

We’ve raised plenty of cash leading up to this correction, and we have continued to follow stops along the way. We’ve also taken opportunities to allocate capital to our best ideas – on sale. We will continue to follow this game-plan. It has served us well over the years – in all types of markets.

We’ll leave you with this thought: during the last 5 years of the bull market that ended in 2000, the S&P 500 suffered 7 pullbacks of 7.5% or more while climbing 147%:


Shane Fleury, CIO

Elevate Capital Advisors

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