Patience and Caution
By Paul Goodwin, Analyst and Editor of Cabot China & Emerging Markets Report From Cabot China & Emerging Markets Report Update 8/26/10
The Cabot China-Timer has dipped below both its 25- and 50-day moving averages, giving us a red light. But our stocks are holding up well, for the most part, and there’s no reason to run for cover at this point. We will tighten up our loss limits, but we don’t feel the need to boot anything out of the portfolio.
Two weeks ago, on August 12, the Halter USX China Index dipped just to its 50-day moving average, then staged a four-session rally. But the high-volume selloffs this Monday and Tuesday pulled the Index decisively below its averages and gave us a technical caution light. Interestingly, though, the Index has traded straight sideways from that Tuesday close, neither gaining nor giving up more than a few points. So while we will take the new signal seriously, we will continue to manage our portfolio stock-by-stock. And on that basis, it looks like patience and caution are the watchwords, rather than heading for the exits. The market is clearly cranky, but its next move hasn’t shown up yet.
Markets opened on the upside today, as new claims for unemployment insurance were down slightly. But longer-term worries applied pressure all day, and the major indexes ground lower right through the close. At the close, The Dow was off 75 points (0.8%), while the Nasdaq fell 22 points (1.0%) and the S&P 500 declined 8 points (0.8%). The USX China Index lost 27 points (0.5%).
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