If the U.S. dollar goes down you can't be as negative as you were when it was going higher. That's a very big positive and it is happening right in front of us. I point it out only because I have said over and over again that the strong dollar is one of the reasons I don't like the market, so if it is getting weaker I, per se, have to like the market more.
I am also mindful that there are so many stocks that have broken down that you have to find the ones you like and begin to buy.
As my friend Jim Stewart of The New York Times said on CNBC earlier today, it is a "healthy correction" that is bringing stocks down to levels that make them more attractive.
However, this market has lost a lot of faith in the Fed. It is correctly concerned about China and it is aware of a commodity breakdown of such epic proportions that you know there will be many casualties.
Plus, does anyone really think that oil can hold $40 if President Obama wins on the Iran deal? I had tremendous faith in David Demshur, CEO of Core Labs (CLB), who said the Saudis just couldn't keep pumping this aggressively. But from what I can see, they sure could. They aren't stopping. They control the world price and they still want it lower. That could mean a lot of dividends to be cut before this is over. I was critical of Chevron (CVX) for buying back stock above $100 but then not buying stock lower. They were right, though, and now I am sure we have to start questioning their dividend along with the dividend of ConocoPhillips (COP).
So, this combination is still toxic to the point where you have to bet that stocks can overshoot to the downside. Yes, stocks are down a lot. But without resolution on these bigger issues -- the tonics to the toxic selloff -- you have to maintain cash.
And never forget the charts. We have been working with Bruce Kamich (you should be reading his stuff) and the charts he's finding tell a hideous tale. The breakdowns will not be encouraging to people who have been buying on the way down betting on a bounce.
Remember, this is a different market -- not one with systemic risk to the U.S. but tons of systemic risk elsewhere that can hurt our stocks.
So what are we doing at Action Alerts PLUS? What I think you should do: Taking advantage of the breaks for the best stocks we like, and using cash raised from the stocks we don't like without touching our cash position.
Sure, I wish our cash position were bigger. But we are finding merchandise to buy below our cost basis on stocks we have wanted to pick up for a very long time.