October 6, 2018
Welcome to the Bollinger Bands Letter Update for Saturday October 6, 2018.
The surge in new 52-week lows confirms that the stock-market correction we have been preparing for is upon us. The triggering force was a surge in bond yields, but the stage had been set for weeks. We think that this will be a garden variety correction. We used to think that four-to-seven percent was a good measure, but these days seven-to-ten percent is a better approximation. From a Bollinger Bands perspective the breakdowns for the indices are all out Squeezes. That suggests volatility expansions to the downside, which are starting to be confirmed by an expansion of the VIX, Wall Street's Fear Gauge.
Here is a table that presents the down side targets for four-, seven- and ten-percent corrections for some of the important indices from their most recent peaks. (Small caps are almost off seven percent already.)
S&P 500 S&P 600 DJIA NYA COMPQ
Peak 2,939.86 1,099.45 26,951.81 13,261.77 8,107.38
-4% 2,822.27 1,055.47 25,873.74 12,731.30 7,783.08
-7% 2,734.07 1,022.49 25,065.18 12,333.45 7,539.86
-10% 2,645.87 989.51 24,256.63 11,935.59 7,296.64
Current 2,885.57 1,020.67 26,447.05 12,991.95 7,788.45
Correction -1.8% -7.2% -1.9% -2.0% -3.9%
The Value Line Plan exited the market this week confirming the developing correction.
Be careful out there!
There were no changes to the ETF portfolios this week.
The Value Line Program is out of the market; with the Value Line Geometric Average at 568.12 the Friday buy stop stands at 555.01.
The ETF Program portfolio holdings:
Style (21): IVV, 1, IWF, 9, IVW, 4.
Country (21): EWQ, 9, EWL, 6, EWA, 12.
Sector (27): XLK, 7, PSJ, 10, XLY, 12.
Our allocations are 50% US stocks, 10% international, 10% yield and 30% cash.
Details on our Allocations, Ice Breaker positions and ETF portfolios along with our weekly Market Timing Chart Pack can be found here:
Until next time, I wish you well.
John Bollinger, CFA, CMT
Copyright 2018 by Bollinger Capital Management, Inc.