Tuesday Tidbits

Yesterday was one of the greatest examples of sell the news I've ever seen. Overnight I had seen the SPX futures up by as much as 20 points. When I got up Monday morning it was down to 14 points. The high for the day was hit at 9:32 and then it cratered. This was of course before the ISM reported.

While there was uncertainty about a deal in some corners I don't think too many people thought that the "deadline" would be missed. The AAA credit rating might be a different story however.

The decline took the S&P 500 below its 200 DMA for most of the day but in ended the day closing a point and half above. We will start to take action, incrementally, if it looks like there will be a second consecutive close below the 200 DMA (this is how I've always done it).

The market has flirted with its 200 DMA a couple of times recently giving the appearance that it is relatively important support right now. This is a rational assessment that will either be right or wrong but it is an assessment that can be made without emotion. The strategy that we are using will either turn out to be correct this time or not (it was in late 2007 but not last summer) but it can be carried out without emotion. This is how discipline works. The thing we watch (you may watch something else) will trigger or not and if it does then we start slowly with a trade or two start going on defense. There is no need to rush as bear markets start slowly giving many months to get out.

Lastly is a comment about a post from Josh Brown aka the Reformed Broker. He recapped a commentary from an advisor named Tom Brakke. Essentially he said that advisors often portray themselves as experts in too wide of a range of topics including politics which Brakke says will lead to spouting an ideology not offering a more practical assessment of how the portfolio might be impacted.

I probably gravitated to this for some sort of confirmation of what I try to do. I put out an email to clients on Friday that simply noted my doubt about missing the deadline but that the more important thing than being right is simply sticking to our discipline. From a portfolio perspective does it really matter why it goes bad (if that is what happens) so much as having something planned in case it goes bad.

From the world is a ludicrously small place file; Brakke emailed me Sunday night to share a little about his having passed through Richardton, ND, the home of the monastic cowboys I wrote about on Sunday.