Some observers of the Market might say it tanked this week.  Others might say the Market simply was taking a breather from the uptrend since the March 6 bottom.  In either case, we touched on this issue in last week's Newsletters.  We discussed how the Market was now entering a "critical period."  And so, the Market answered this week with a consistent sell-off, and in no uncertain terms said to investors, "GET OUT of Dodge!".  So we did and closed all positions.

 

The fact of the matter is that by taking a breather, or by tanking so to speak, the market is doing what it MUST DO if there is any hope of a sustained rally in the near future.  Let me explain.
 
One of the favorite expressions I try to convey to clients is that the Market is not linear in its movement.  In other words the Market doesn't simply give off a clear signal that it's advancing, or a clear signal that it's declining.  If that were the case then everyone would always know in which direction the Market is moving.  Instead, the movement of the market is such that it creates confusion, and with confusion comes the majority of investor indecision.  With indecision comes investor reluctance to re-enter the market after a downturn, or vise versa, get out of the market at some point during a bull market.  The result is that a majority of investors either stay in too long or get in too late because they misinterpret market movement.
 
This recent pull back of the Market is healthy in my opinion.  It's analogous to climbing a mountain; a mountain climber periodically must pause and rest before continuing his/her expedition.  One might add that it is a Herculean task to make most climbs without pausing. 

 

Here, the market is trying to climb out of a bottom heretofore unseen since the great depression.  A tall task indeed!  The way the Market is likely to rebound is much in the way we have seen over the past two months.  It will move up and retrace.  Move up and retrace or decline.  Move up and then up again, and then retrace or decline.  There are many variations of the same theme, but suffice it to say the climb will be jagged and not smooth.
 
So for now, we rest!  We are re-tooling our inventory of possible stocks to buy and, as always, will keep you informed of our every move.