Playing Defense is Not Bad, Just More Risk In the Market

by | Jun 29, 2011 | Asset Management, Point and Figure

Weekly Commentary for April 5, 2011

So, UConn wins the big game by shutting down Butler.  Butler makes only 18.8% of their shots (a pitiful number), and UConn plays big-time defense.

Since the recent stock market peak on February 17th, the short term indicators flipped to playing defense, and the intermediate indicators followed soon after.  So, we’ve played defense.

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Our game plan at that point told us to stop buying, which is what we did. We even took profits in some situations.  What have given up by “sitting out” the past few weeks?  Almost nothing.

That’s right: the S&P 500 and the Dow are right where they stood on February 18th.

Now, in the past few days, the short term indicators have improved. The intermediate indicators are about ready to reverse — back to offense.  We do not see ALL green lights quite yet.  But the shopping list is ready.

If you are relying on a blog post for specific investment advice, you are making a huge mistake. Please speak with an investment adviser before making ANY investment decisions.

If you do not have an investment adviser, we encourage you to contact Mullooly Asset Management at 732-223-9000, or through our website.

Under no circumstances should the content discussed on this post be considered specific investment advice.

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But wait Tom, you say:
– Oil is near $108
– We continue to see unrest in the middle east
– Japan could be melting down.  And the economy doesn’t feel like it’s going anywhere.

How could this market be going up?

It’s not our job to predict what’s to come. Our job is to continue to follow the point and figure rules which got us here.  Let’s be clear: what these charts are saying is the RISK level in the market was higher the past six weeks.

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Sometimes, when the market flips, and we start playing defense, nothing happens.  And then (sometimes) you get 2008.  While playing defense, we have to be prepared for anything.

There are times to be playing offense, times to be playing defense.  If you know WHEN to play what side, you can win. Sadly, a lot of folks do not even know there are two sides to this game.