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Investors Weekly Update: Correction Ahead

By Jack ChanETFsAug 12, 2019 08:50AM ET
www.investing.com/analysis/investors-weekly-update-correction-ahead-200454140
Investors Weekly Update: Correction Ahead
By Jack Chan   |  Aug 12, 2019 08:50AM ET
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US500
-1.78%
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DJI
-0.99%
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VIX
+13.41%
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OSX
-0.57%
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Our equity/bond model - This long term reliable investing model provides investors with simple decision making in the markets:

  • When the model favors stocks, investors should overweigh in equities for maximum growth.
  • When the model favors bonds, investors should overweigh in bonds for safety.
  • SPXUSB Monthly Chart
    SPXUSB Monthly Chart

    SPX Monthly Chart
    SPX Monthly Chart

    Our benchmark S&P 500 is on a buy signal.

    OSX Monthly Chart
    OSX Monthly Chart

    Oil sector is on a major sell signal.

    VIX Daily Chart
    VIX Daily Chart

    VIX – volatility index

    VIX is up and major indexes are down.

    SPX Weekly Chart
    SPX Weekly Chart

    Its been a few years since we looked at this long term chart between the benchmark SP500 and the transportation index. According to the “Dow theory”, the markets are in the process of a major top when there is a divergence between these two indexes.

    We have witnessed and charted these divergences over the past twenty years:

  • 2000 – resulted in a 50% correction
  • 2008 – resulted in a 60% correction
  • 2015 – only a 10% pullback
  • 2019 - ?

    Summary

    The long term signal on the broad market is up.

    However, the current investing model favors bonds, therefore, investors should continue to overweigh with long bonds or bond ETFs for safety.

    The Dow theory suggests that a pullback or even substantial correction can materialize in coming weeks and months. Caution is advised.

    Investors Weekly Update: Correction Ahead
     

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    Investors Weekly Update: Correction Ahead

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    Comments (1)
    Christopher Anderson
    Christopher Anderson Aug 14, 2019 6:03AM ET
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    Good spx call
     
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