The “Power of the Pattern” has been suggesting for months that their will be very few places to hide (a very short list) when it comes to portfolio construction. Why?
The CRX Commodity index broke multi-year support back in May, suggesting that lowering exposure to risk assets was the key. In September an update to the Dollar breakout/CRX breakdown reflected more of the same (see post here)
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I’m not much into labels such as inflation/deflation/recession/contraction/hyper-inflation/growth/depression.
My goal…work towards helping investors to “enlarge portfolios regardless of market direction!” Can this be accomplished every single day…NO WAY!!! From a big picture this goal, remains my focus and the above chart is intended to reflect this big picture goal.
The Dollar/CRX combo above has a been a pretty “Guiding Light” to portfolio construction for the past few years, per when investors should overweight and underweight towards risk assets. Since May the above combo, from a “Power of the Pattern” perspective, has continued to send a message that risk assets are not the place to be and that their will be very few places to hide!!!
CRX is at the lower end of a flag/pennant pattern at (3), inside of a falling channel and the flag pattern ahs to end soon!!! If the CRX breaks down out of the flag/pennant pattern, risk assets across the board will be put under very strong downside pricing pressure!