We’re looking for critical support at the 200-day moving averages for the major indices. For the Dow that is 16,518; for the S&P we’re looking at 1,777; and for the NASDAQ, 4,264. Those numbers have to hold. I think they will, however, the bad news is that it will not take a whole lot of selling to get there.
A Balanced Approach
I received this tweet from an avid viewer of my show:
Club retreats @club_retreats 6 hours ago
@cvpayne #askpayne: I have lost 10% of my retirement in the last 3 weeks. Is that the correction people talked about or is more coming?
Obviously, this tweet reflects what a lot of people are thinking, but my concern was the balance of his portfolio. I asked what he was holding and his response was:
@cvpayne : $AAP $ARIT $CMCM $CYS $QIHU $SINA $SYNA $FFIV $FLML $GS $GTAT $RAD $SPLK $DATA $HBI $ILMN $IDTI $MELI $SUMO $$SSYS$TASR Unbalanced
Everyone loves the high-flyers when they go straight up, but most investors cannot deal with the volatility of the losses that come from time to time. Note: I think most of the high-Beta names in our model portfolios are buys, not sells on weakness.
Below is a chart showing how a balanced portfolio for the average risk-averse investor with $150,000 should look:
| Number of Positions | Sectors | % or Portfolio |
| 1 | Consumer Staples | 6.6 |
| 1 | Consumer Discretionary | 6.6 |
| 0 | Financial | 0 |
| 1 | Transportation | 6.6 |
| 1 | Energy | 6.6 |
| 3 | Technology | 19.8 |
| 1 | Services | 6.6 |
| 1 | Medical | 6.6 |
| 0 | Agriculture | 0 |
| 2 | Industrials | 13.2 |
| 1 | World Markets | 6.6 |
| 3 | Hedges | 19.8 |
| 15 | Total | 99.0 |
Note: I have subscribers that take greater risks and can ride the bigger waves because the rewards are larger, but from time to time, so are the losses.
Back to the Tweet: There is too much China and not enough low-Beta names. Recently, I covered closing Rite Aid (RAD) in a recent segment on my show. I must reiterate that investors must match temperament with portfolios. As for the market sell-off, it is long overdue. I find it interesting that weakness has been accompanying bad economic news, just as the market was thriving. Despite all the chatter from the talking heads, it has largely been higher this year on good news. The fact of the matter is, the Fed cannot go back on QE; the act would be an admission that the whole thing does not work… moreover it would signal huge problems with the economy.
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