We’re taking the highly unusual step of delaying the release of our March issue today. It will most likely be released online Monday.
The reason for postponing the issue’s release has to do with Upgrading 2.0. A week ago, I would have said there was no way that strategy’s defensive protocols would possibly come into play so quickly. But with the S&P 500 index down over -10% in the past five days, change has been happening rapidly. Given that Upgrading 2.0 is based primarily on month-end signals and there’s now at least a chance of that kicking in by the end of February (which for our purposes is the close of the market tomorrow), we think it’s wise to wait and make sure.
Incidentally, the type of market decline we’ve seen over the past five days has only occurred during four other periods in the past 20 years — 2015, 2011, 2008-09, and 2000-02. Two of those four periods developed into very significant bear markets (-50%), 2011 saw a decline of nearly -20%, and 2015 saw losses stop at roughly current levels (though a second -10% correction would follow just a few months later). So while we can’t conclude anything definitively from those prior cases, each was significant enough that it’s clearly worth waiting a few days now to get the data necessary to make the best Upgrading decisions.
I’ll be looking at Sector Rotation and Dynamic Asset Allocation tomorrow, as I always do on the last trading day of the month. If the decisions are clear enough, we’ll update those strategies tomorrow. If not, we’ll push those updates into the weekend so as to get the final month-end numbers for those strategies as well. Either way, you’ll find updates of some sort on the SMI website tomorrow letting you know where things stand.
Keep in mind that even if Upgrading 2.0 does kick in, which is still more unlikely than likely at this point, it would likely only mean 1-3 funds being sold and moved to cash. It would not be a wholesale change or involve massive selling. And given that DAA is already very conservatively positioned (thank you DAA!), changes there should be limited as well.
Please know that SMI is committed to getting you the best possible information in as timely a manner as possible. Periods like this are always challenging for investors, but if you’ve been with SMI during past bear markets and downturns, you know we’ll be here with you every step of the way. Keep following the system and we’ll all get through this together!
