Is There a Pundit in the House?: Technician Louise Yamada's Advice for Worried Investors

We, and most of the people we deal with are not worried.
Vigilant, yes. Wary even. But not "worried". This is still a bull market.
However, being non-denominational, some would say agnostic, as to direction we try to present the complete picture.
From Barron's Up and Down Wall Street column, we enter the conversation half-way in:

What Karl said about Hillary. Medical inflation heats up; so does the bond market. A technician's advice for worried investors.

...THE STOCK MARKET MANAGED to pull out of its midweek swoon on Friday, but the benchmark Standard & Poor's 500 ended lower for the second straight week. But what has gotten market watchers' attention has been what's happening away from center stage, in the frothier sectors. That would be the Nasdaq, especially the so-called momentum stocks, and smaller-capitalization issues.

At one point last week, the Russell 2000, the small-cap standard bearer, entered a so-called correction, which has been determined to mean a 10% decline from its high (who makes these rules?). While the index managed to move out of correction territory by week's end, small-caps still represent a major source of worry for the bulls, as a portent for the broader market.

There could be further downside to the Russell 2000, says Louise Yamada, the doyenne of technical analysts, whose shingle reads Louise Yamada Technical Research Advisors. The small-cap benchmark, which is down to 1100, could slip another 100 points to the nice, round 1000 level. Painful in the short term, to be sure, but she points out that such a drop wouldn't pierce the uptrend from the 2009 lows where the current bull market lifted off. 

Similarly, the Nasdaq Composite also could see a drop of about 10%, she adds. As for the Dow Jones Industrial Average or the S&P 500, dips to about 15,500 and 1750 are possible in the near term, but she adds that would just take those measures back to their February lows.

Away from the major averages, Louise points to the widely noted breakdowns of the previously "parabolic" biotechnology and Internet stocks, which have had their own bear markets of roughly 25% from their highs. If you need reminding, social-media companies such as Twitter (ticker: TWTR) are off more than 50%, although that stock managed to eke out a gain on the week after a number of analyst upgrades (which followed our colleague Andrew Bary's positive take on the stock at Barrons.com on May 7.)

Less apparent has been the "distribution" in various sectors of the market, Louise adds, notably aerospace, media, and especially banks. The latter group has been pressured by the decline in intermediate-to-long-term interest rates, which squeezes their net-interest margins. Meanwhile, trading profits are down, while brokerage revenues are dwindling in the low-yield era.

These aren't the only divergences evident across the markets. Junk bonds and small-caps tend to trade in tandem. The stumble in the latter would seem to make the former vulnerable. But, as noted, yield is being coveted above all else. 

In all, the equity market looks oversold. But that isn't necessarily a buying opportunity if you aren't in a strong bull market, Louise adds. As evidence of the less-than-exuberant situations, she points to the dwindling number of new highs, even as the major averages were setting records until recently. 

Her advice: Raise the "sell stops" on stocks you own. That is, be prepared to take profits or limit losses if your positions falter. That, it should be noted, is the opposite of the "buy the dip" mantra chanted throughout the bull market. 

Still, Louise makes the point that a pullback wouldn't spell the end of the bull market. When coaxed, she concedes that to sell in May and go away, to coin a phrase, mightn't be a bad idea for the time being....MORE

Louise is very good at what she does but seems to have developed a somewhat negative temperment.
From October 29, 2013's "Technical Analysis: Louise Yamada Says Commodities Are In A Death Cross":

As I said in 2012's "Louise Yamada Sees a Big Bear":

Louise was very sharp during her time at Smith Barney but had a stumble just before the start of the bull back in 2009* that made me shy away from posting:
March 2, 2009
Louise Yamada: Don’t “venture into the waters” 

That "Don't Venture..." was exactly one week before the bear market bottom.....

Here's the THOMSON REUTERS EQUAL WEIGHT CONTINUOUS COMMODITY INDEX (CCI)  she used as her bogey.The ETF built on it is the GreenHaven Continuous Commodity Index Fund. Note the timing of her call, trading that Oct 29 close of $26.39 to the January 9, 2014 low close of $25.33 would have taken some fancy footwork with the very real risk of getting wrong-footed into the subsequent up-move. Take all technical analysis with a grain of salt. Even ours.