As we enter the always frightful Month of October, the rally seen at the end of August has proved short lived, making a retest of the August lows more likely. Since the market’s decline, which began in mid-July, the S&P 500 and NASDAQ Composite are down 7.5% and 8.8%, respectively. A drop of this percentage fits my definition of a correction in an ongoing bull market, which generally has been a decline in the range of 7% to 12%. With the short term trend now down, our course of action has been to trim our winning positions into strength and eliminate holdings which do not participate on good days. When and if we successfully retest the August lows, a lengthy period of time will be needed to repair the damage done to individual chart patterns.
The most notable development in sector analysis might be the recent dramatic decline in the healthcare sector, led by the weakness in the Biotech-Biomed and Generic Drug groups. While many suggest that a Hillary Clinton tweet may have be responsible for this, I believe that these groups suffered from a long overdue bout of profit taking after a significant period of outperformance. Once they have stabilized, I fully expect them to resume there up trends. This may take a while, considering the damage done to their charts. An emerging sector that we currently favor is the Regional Bank sector. Continue to avoid all sectors related to energy, metals and commodities as they do not appear to have bottomed yet.
Disclaimer: Rocket Capital Management, LLC is a registered investment adviser. The comments presented do not constitute personal advice and are not intended to be a solicitation for the purchase of any individual securities or investment strategies. All investing involves risk. Please consult with a registered adviser before making any investment decisions.