What To Do With A Correction

January 14, 2016

Wise words from Jim O’Shaughnessy (from an article written August 28, 2014):

In the past, the United States has endured far more perilous times than those we currently face, and I believe that you will never make money betting against the United States over the long-term. We have come through far greater challenges to emerge stronger, more vibrant and ready to face the future. And today, we find ourselves at inflation-adjusted highs for the S&P; 500. Does this mean that stocks will continue to rise? Absolutely not. I’m sure that at some point we will get a 10 to 20 percent correction in the market. But when we do, remind yourself of this simple fact—the U.S. stock market has come back from every setback and gone on to make new highs. Hundreds of years of data back this up. When the next correction comes—and it will come—remind yourself of this simple fact, and BUY.

Past performance is no guarantee of future returns.

1 Comment | Investor Behavior, Markets | Permalink

Posted by:

High RS Diffusion Index

January 14, 2016

The chart below measures the percentage of high relative strength stocks (top quartile of our ranks) that are trading above their 50-day moving average (universe of mid and large cap stocks.) As of 1/13/16.

The 10-day moving average of this indicator is 37% and the one-day reading is 21%. Dips in this index have often provided good opportunities to add money to relative strength strategies.

This example is presented for illustrative purposes only and does not represent a past recommendation. The performance above is based on pure price returns, not inclusive of dividends or all transaction costs. Investors cannot invest directly in an index. Indexes have no fees. Past performance is not indicative of future results. Potential for profits is accompanied by possibility of loss.

28 Comments | Momentum | Permalink

Posted by: