Academics (apologies to my colleagues) and many financial advisers believe that market timing is fruitless. Few academics have actually tested the approaches used by technical analysts. I remember a "test" by John Train who would take a chart of a stock and cut it in half asking the technician to forecast what was going to happen in the second half of the chart. Ridiculous right? I never heard of him cutting a spread sheet of data in half and asking the fundamental analysts the same question when he was an adviser along with my boss at Scudder, Stevens & Clark in the early 1970's.
Professor Andrew W. Low at MIT Sloan is an exception in the academic world and I recommend his book "A Non-Random Walk Down Wall Street." We use a different language but Professor Low has shown that many technical tools work, indeed these are what many algo traders have turned into formulas. Financial advisers are another story. They have been brainwashed to believe that if you get out of the market you will miss some of the best up days that contribute to performance, however, performance can be greatly improved by sidestepping some of the worst days in the market.
A week ago I wrote about the market turning down, and said, "Prices could stop anywhere but they are probably going to hold around the 12-month average line around 2,541. Market observers may also want to remember that secondary reactions (within Dow Theory) run around 3-weeks to as long as 3-months. It would not surprise me that this correction ends sooner than 3-weeks." (emphasis added)
In this hourly Japanese candlestick chart, below, I have zeroed in on the low of this past Friday. On Friday the S&P 500 reached the 2,541 area (see the paragraph above) and you can see two hourly hammer patterns followed by a confirming bullish (white real body) candle. Prices rallied but are now rolling over for a potential "retest." I anticipate that this "retest" will be completed by the end of this week. If I am correct, the rally going back up from next week into mid-to-late March will not carry every sector and every industry. Some will not participate or lag significantly and those names should be culled from portfolios, in my opinion.