Corrective actions

today (monday 17th August) we see some corrections
on the stockmarkets, so the question is what to
do with our ETF portfolio ?

Well first of all the long term trend is still up,
and some small corrections in such a strong uptrend
will not change the main trend. Nevertheless
traders might think portfolio adjustments might be
needed, and indeed short term technical analysis
(TA) programs give 'exit long' signals for many
ETF funds. As i don't believe much in the added
value of many highly sophisticated (and very expensive)
TA programs, I just use a rather simple and
cheap tool, namely Dreamtai-5-beta (or occasionally
a free tool 'Webotron, with many indicators):

http://www.dreamtai.com/index2.htm

And according to the Dreamtai software, the US
financial sector (eg XLF) still looks like a 'buy'. So
first thing i've done today is sell a hightech stock
(RFMD); and instead now bought some extra ETF for
the US financial sector (IYF); not at a lower price
than i bought it first, this would be 'averaging down'
(a wellknown trading mistake) but just slightly above
the value for which I bought it some weeks ago,
when starting this blog. Now it's a matter of wait
and see, if the market will bounce up again. Here is
a 3months chart, made on yahoo for two financial
ETF's (XLF and IYF), compared with the Dow, until last
Friday (click on the image for a large scale view):





Now today there is a further correction of about 2 %,
but the uptrend for the financials clearly remains;
so this correction could be just some 'Monday' effect,
and later this week we might see a continuation
of the uptrend; well at least for those ETF funds i've
identified to have strong uptrends; just to be sure, i
will keep the stoploss at the original value and will
exit my positions if they are not higher, in a few
days, or later of this week.

As for the position in IYR (real estate), it already
went through the stoploss so it's sold, as a matter of
trading discipline. Looks like a pity, as it's been up
for almost 8% since buying, but no big deal, i like to
catch large&long upswings, and a little loss doesnt hurt
(in this case due to the trading/broker costs, often
overlooked/ not accounted for by most TA programs,
and/or short term traders..). So in line with common
advise, i like to cut my losses short, and let my profits
run, hopefully the US financials (like XLF). Until next
time, and good luck with your own investments,

jef