Aug 27, 2015
Without question, these last couple of weeks have been incredibly difficult for the average investor, both here and globally. Most emerging markets have losses of 30% to 50% off of their annual highs, and in the US, we've just experienced our first "true correction" in 4 1/2 years, with the major indices falling more than 10% from their peaks (anything over 10% is considered a correction, with anything over 20% considered a bear market).
BTW, market corrections are not only healthy, but they are actually REQUIRED, in order for a bull market to continue it's advance (a point that few "TV guru's" is making). The fact that we went 4 1/2 years without one is off the charts amazing...in fact, it's an all time record.
We've been much more fortunate here at the VRA, as we've been able to navigate the highs/lows well, which has allowed us to continue putting up market smashing returns. Over the last two months, as most stocks were beginning to fade quickly, we have recorded net profits of 510%.
During this time, we've had a total of 10 trades (buys/sells..closed out positions), and our record is 9-1. This puts our industry leading total at more than 1900% in net gains over the last two years.
As I tweeted on Thursday, "anyone that was able to come out of this market insanity with their portfolio intact should feel great about themselves...as this makes you the truly smart money." Now, the key is keeping our heads screwed on straight with our eye on the prize. It's quite likely that the worst may be over, but folks, trust me when I tell you that this recovery will almost certainly NOT be straight up. Take a look at the following 1 year chart for the S&P 500. Talk about ugly...this is what a chart looks like when you drop 1100 points within an hour of the open on the Dow and 225 points on the S&P 500.
So, what are we to make of this chart? Well, I can tell you right away that I HIGHLY doubt we are headed back to fresh highs anytime soon. Keep these levels in mind; Dow Jones: 17,790 & S&P 500: 2075
These levels are where the 200 day moving average of both indices reside, and there's one thing I can pretty much guarantee you; once we start to approach these levels again, you can bet your bottom dollar that the shorts are going to come out in full force (not to mention the 50 dma as well...something I will alert you on in future updates).
Bottom line: in order to get back over the 200 dma, we need additional gains of more than 7%...and it won't be easy. Only then, will technical analysts like myself be willing to flash the "all clear" sign for a healthy bull market. So yes...it's pins and needles time until then for Mr. Market.
Kip
vraletter.com