Today, I have decided to use a very popular indicator as a prism through which to view the SPX - the Bollinger Bands.
While some of it is difficult to see from this zoomed out perspective, I have marked on the chart the accompanying decline/advance that follows after the monthly SPX has risen above the two standard deviations upper Bollinger Band.
Since 2010, the monthly SPX has risen above the two standard deviations upper BB six times (now seven if you count this latest bull run), and five out of those past six attempts at rallying above this magical monthly BB have sputtered out and resulted in corrections on average of about -6%!
December is now the second month that the SPX has been above the two standard deviations BB, and so taking into consideration other variables as well, I would argue that the probability of an impending correction is quite high. I would advise raising cash reserves to at least 30-40%, so one could hopefully take advantage of a dip to come!
I will close this post with this lovely headline from MarketWatch yesterday: “ ‘I’m 100% in equities…You’re never going to make enough money if you have 40% of your money in bonds’ says CNBC’s *** ***”…
While some of it is difficult to see from this zoomed out perspective, I have marked on the chart the accompanying decline/advance that follows after the monthly SPX has risen above the two standard deviations upper Bollinger Band.
Since 2010, the monthly SPX has risen above the two standard deviations upper BB six times (now seven if you count this latest bull run), and five out of those past six attempts at rallying above this magical monthly BB have sputtered out and resulted in corrections on average of about -6%!
December is now the second month that the SPX has been above the two standard deviations BB, and so taking into consideration other variables as well, I would argue that the probability of an impending correction is quite high. I would advise raising cash reserves to at least 30-40%, so one could hopefully take advantage of a dip to come!
I will close this post with this lovely headline from MarketWatch yesterday: “ ‘I’m 100% in equities…You’re never going to make enough money if you have 40% of your money in bonds’ says CNBC’s *** ***”…