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posted on 02 August 2017

Portfolio Positioning Review

Written by , Clarity Financial

While many will consider the commentary we have posted this week “bearish," followed by the assumption that our portfolios are not invested and we are somehow “missing out" on the advance, let me assure you such is not the case.

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Our existing client portfolios are fully allocated to the market in accordance with their model allocations. New client portfolios are being slowly allocated into their models as the market breaks out of consolidation levels to new highs.

All accounts have had stop limits raised to current running support trend lines.

The current advance continues to remain intact despite a lack of legislative action, weaker economic and inflationary data and less than inspiring forward guidance on the earnings front.

As shown in the bottom part of the chart above, on a very short-term basis the market currently remains on a “buy signal," however, the weakness of the market over the last couple of days has led to some deterioration. Furthermore, the market is struggling with recent resistance levels as the overbought condition continues to limit the advance.

If the market can pull back to support, and work off some of the overbought condition without triggering a broader “sell signal," we will add exposure to client portfolios.

We remain cautious, however, on the type of “risks" we take on in portfolios. Capital preservation always remains our priority over chasing returns.

As we have stated many times:

“Making up a missed opportunity is easy, replacing lost capital is impossible."

Remember, you can always grow your invested capital back, but you can never replace the lost “time" in doing so. This is why “dollar cost averaging" and “buy and hold" investing leave investors short of their retirement goals over long periods of time.

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