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When Money is King

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There are occasions to be extra aggressive available in the market and different occasions when it makes some sense to put low. To me, sitting extra on the sidelines for the second isn’t a foul thought.

For instance, I wrote an article on July 15 the place I made the case that the reward-to-risk had shifted to the upside, and that we may have hit the underside. And, at the moment, my goal on the S&P was within the vary of 4150 to 4170. Guess what? As you’ll be able to see within the chart under, we hit that concentrate on this previous week. And so it may make some sense to be a bit extra affected person right here and let some pure profit-taking happen.

May we go increased? Completely. In reality, our Chief Market Strategist, Tom Bowley, who declared the June 17 backside (The “Bowley Backside”), believes we’re simply initially of a secular bull market. However he additionally has identified that we’re seeing some unfavorable divergences throughout the board, which suggests we may see some pullback earlier than additional strikes to the upside resume.

Thus, from my perspective, it might be time to “sit in your palms” till the reward-to-risk as soon as once more favors an upside transfer. And although one may argue you possibly can put a few of your capital to make use of on the brief aspect, it will get more durable to make profitable trades when the bulls are in cost.

For positive, we have seen a sentiment shift, with merchants now extra keen to contemplate “shopping for on the dips.” However there is not any must rush in right here; the S&P has risen over 14% for the reason that Bowley Backside. And if the market continues to go increased? That is effective. However having some money able to reap the benefits of inevitable dips makes a whole lot of sense.

Within the meantime, if you need to often hear what Tom Bowley thinks in regards to the market, just click here to enroll in our FREE EarningsBeats Digest and you’ll get well timed updates each M, W and F in your inbox.

At your service,

John Hopkins

EarningsBeats.com

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