It has been quite the red week, and there have been few bounces if any
Re-configuration of the global supply chain is all over the headlines. Headlines are mostly negative and there is apprehension of what may come next – markets prefer blue skies to move higher.
It is interesting to see that my two indicators (still in testing) signaling to me that I should deploy my cash now. I expect investors to begin bargain hunting some time – though I do not know when that time comes.
My first indicator, a modified relative strength indicator, shows that the “rubber band” is stretched and there will be a snap-back, i.e. release from selling pressure and the market will rise. However, I am somewhat cautious. Since it seems there are still long-term investors who have not capitulated yet as indicated by, particularly, investors “hanging on” for 55 and 89 days to their investments. The old adage is that once there is capitulation selling, that is, longer term investments are liquidated by institutional investors: that is the time to buy.
Looking at my other indicator, which is simply a high-low trading range indicator, it says now is a time to start deploying cash. That is, the lows have been getting lower. I am not sure what to make of it yet.
As I have said before, I use these indicators to control my leverage. I am always long (right now this is unfortunate), and I always have tail risk protection in case the market breaks a smaller market participant leading to (the threat of) ripple effects impacting bigger market participants.