Change Allocations On A .2% Move?
Chris Kimble | Sep 03, 2015 01:15PM ET
Can you believe that its a really big deal to some if an index is down 9.9% from it highs (non-correction territory) or if its down 10.1% (correction territory)? Does .2% dictate that we make a different allocation decision? Are you kidding me?
Do you find yourself agreeing more with the person on the left or right? I'm in the camp with Lou on the right. Should we make investment decisions based upon a term (correction)? Not me.
This chart above looks at the Dow since 2010 focusing on trend channels and Fibonacci retracement levels.
The Dow has been in a well defined rising channel over the past 4 years, touching resistance numerous times and creating support back in 2011. The decline last week did nothing more than take the Dow down to the bottom of this rising channel.
I applied Fibonacci retracement levels to the 2011 low and the highs this year. As you can see, the 23% level was hit at (1) this week -- just as it was hitting the bottom of the rising channel.
Should you make investment decisions based on the market being down 9.9% or even 10.1%? Good luck if you do.
Humbly I have a bias and it's following the price action and trends billions of people create.
Despite the decline since the highs in May, this intermediate 4-year trend remains in tact. If support at (1) breaks, then I would be looking to make some allocation changes, regardless of whether it's in “correction mode" or not.
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