I wanted to put a few things into perspective as clients continue to ask me over the last couple of weeks if I think it's good time to pull out of equities. There is no question as to the great run we've had in the last 3 years in equities, fueled by unlimited liquidity. But, we're not here to discuss economics, or what I think the future might hold, but simply how you should approach the idea of asset-reallocation.
You have to ask yourself, did you hold onto your equities over the last 5 years through this bull market?
If you did, pat yourself on the back and look at the chart above and marvel at the bull run you've managed to capture. As great of a run this has been, the recent correction we've seen is hardly a big move at all. Looking at our Trend Periods indicator, (which is a great tool for helping you in times of panic) it has not budged since late 2012. This approximately 5% correction should not be causing you to pull your money out of equities, just yet. I know every financial news site your reading right now is talking about volatility picking up, emerging markets and China is falling apart, Fed's tapering, run on banks, and it seems like everything is going to hell; perfect timing for pulling out of equities and putting into something safer right?
If that is true, you probably would have missed most of this bull run and have pulled your money out in the middle of 2009, multiple times in 2010, and a few more times in 2011. So don't let a few new stories and a few bad weeks cause you to make any rash decisions. I see some major support around $172 (Volume Profile Low Volume Node), $169 (50 Week SMA), and $157 (23.6% fib level), if these levels were to be breached, then I would say you have a legitimate reason to consider pulling out of equities, as you can see we have a far way down to go if the markets do turn bearish.
I would also like to stress that I'm not advocating that you ignore what you're hearing in the news, but simply take it with a grain of salt for your long term portfolio. All the issues I've listed above are all great reasons that we may be looking at a market top here but, until the markets start to show prices that reflect that and break some support level, don't panic and go and sell your holdings just yet.
