How We're Preparing to Seize Opportunity in This Market Pullback
Looking for support before we consider any fresh moves.
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Folks, if you missed my opening comments around 7 a.m. ET on Friday, I discussed the current market retrenchment following the “buy the rumor, sell the news” event that is the U.S. federal government shutdown ending and the market having to re-think a December Fed rate cut.
I also noted the discussion we had with Freedom Capital’s Jay Woods earlier this month; the market was likely due to a pullback coming off its six-month run at the end of October.
In that same discussion, we talked about watching levels of support and past buying levels. With that in mind, as the pullback looks to continue on Friday, we are closely watching the S&P 500 and its 50-day moving average at 6,699.12, and the Nasdaq Composite against its 50-day moving average at 22,811.22.
As you can see in the charts below, neither market barometer is close to being oversold based on the RSI levels, and that means that as we contemplate any moves with the Portfolio’s shopping list, we will want to see those support levels hold.
As we think about one of those “healthy” 5% market corrections, applied to the S&P 500’s late October high, that would land the S&P 500 near 6,575 or somewhere near its 100-day moving average at roughly 6,520.
We know some of you are looking to put capital to work, while others are frustrated by the market’s turn lower. Let’s remember that each year the market has a few 5% pullbacks and that tends to be healthy, especially when things have been extended, overheated, stretched or whatever you’d like to call it.
While we tend to buy individual stocks, we have to keep the market in mind. This means that sometimes the thing to do is wait for the market to move through the pullback and find support before we make a move. To the extent an individual stock is finding support as the market does, so much the better.
And as we think about this, let’s take a page from Charlie Munger’s playbook:
