We have been waiting for signs to allocate more capital into the market. There is no simple buy or sell signal in the markets - if there was, it would be easy. However, we think we have held the bottom, the correction is potentially behind us, and we have chosen to invest more cash based on these signs.
Below is the S&P 500 over the quarter until now, the push to the bottom of Aug. 20 was sudden and fast - we had a bounce where we were expecting a retest of the bottom. We think we saw the re-test last week, as well as a strong rally higher. This re-test was where we could potentially break towards new lows, but the big hold and rally is very encouraging. Holding the red line of support was essential and we think we may have found the bottom.
The chart below illustrates the S&P 500 last week. For lack of a better word, we had horrible news on Friday - US jobs data came in at 140k, when the recent numbers have all been about 250k - a hugely disappointing number. This is about as bad of news as you can get in a bad market, and what did the market do? It rallied strong all day long. This is an incredible sign of strength and we have used this opportunity to allocate more funds into the market. Essentially, if the market has good news and doesn’t go higher, it's bad news. Conversely, if the market has bad news and doesn’t go lower, that is good news. Just like our email on bad news, as the market closes weak on Friday, it's bad. A great Friday close like this is good news, and we followed through on monday.
We have added to some USD positions and all positions we have bought on recent pullbacks have rallied with the market – we think this is an appropriate time to buy. If you currently have additional funds sitting in cash, this would be a good time to allocate towards the stock market. Please let us know if you would like to take strategic action.