Circle The Wagons

August 1, 2007
By seadmin

Well my friends, it finally happened. The correction that I felt was so long overdue has now befallen us, and it’s done so in spectacular fashion. Last Thursday we witnessed the Dow plummet more than 300 points, while the following day we saw the Industrials cave another 200-plus points.

Simply put, stocks are not the place you want your hard-earned investment capital right now. In fact, I’ve been advising subscribers to my Successful Investing advisory service that they should be near 90% cash for some time now.

The result of that high cash position meant we sustained no damage to our model portfolio last week. Instead, we watched placidly from the sidelines while panic sellers reached for the Advil, the Johnny Walker and a nice warm blanket.

Based on the shear technical picture of this market, I do think we may get a little bit of a snapback rally this week along the lines of what we saw on Monday. But as you can see by the chart of the Total Market VIPERs (VTI) below, the overall market is now trading well below its short-term 50-day moving average (blue line) and just a tad above the long-term 200-day moving average (red line). This is a bad prognosis for the continued strength of this bull market, and reason enough to be ultra-cautious right now.

My recommendation is to use any rally here as an opportunity to unload equities, particularly if your portfolio still is heavily exposed to stocks. And, if you are allocated to any stocks in the financial sector, then you absolutely must get yourself out of this collapsing market segment. One look at the Financials Select Sector SPDR (XLF) below tells a tale of woe that you don’t want to experience first hand.

The silver lining to this cloud of widespread selling is that we now are set up for a big buying opportunity once this market turmoil subsides. The time for buying equities may not come for a few more months, but I suspect that by October subscribers to my advisory services will have a healthy exposure to the market — a market that is much less likely to experience another big correction in the near future.

Want to learn how subscribers to my Successful Investing advisory service were able to sidestep the latest market malaise? And, do you want to find out when it will be safe to get back into the equity waters?

Click here to learn more about Successful Investing

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