Did the buyers believe we had reached a point of good value or was it a dead cat bounce (a big up day after an oversold correction)? Only time will tell, but at Market Gauge we stick to our very tight discipline and risk averse investment process. We now sit mostly in cash across the board on our investment strategies although a few (IWM and Complete ETF) are invested in the remaining pockets of strength.
I remember when I was young having the experience on a roller coaster and how intense that first downhill felt. It seemed to never end, even though it was a mere second while my stomach felt like it was in my head. I took a deep breath when we hit bottom and started to accelerate on the next uphill which was conveniently placed to slow the dissent, create the opposite effect to dropping and made the ride even more thrilling.
I remember then when that first gyration was over and it was time to enjoy the rest of the ride, I thought the remainder would not be as dramatic as that first hill down. To my amazement, we started going up a big hill slowly only to experience yet another drop down, which is the unique design of most coasters; they get you in complacency mode and drop you again.
My experience with the stock market is not very much different. It is why in our development we did so much work on momentum (TSI), moving averages (Triple Play/Relative Performance) and other technical indicators that "broadcast" what the underlying pinning's of the market look like (Real Motion/Momentum).
Then we put these and other invaluable indicators into a platform called Big View that encapsulates all of the variables one needs to review in order to see why we are positioned the way we are and understand the Global Macro picture This is the uniqueness of the Market Gauge platform and we continue to work hard to look at any new data or iteration of existing inputs that could contribute, in some small way, for Market Gauge to help you make better decisions that will enhance performance with less risk and a more effortless and enjoyable investment experience.
My business and life partner Mish has been on quite a few national TV shows in the past few weeks. If you have not seen them, make sure you check out her Twitter page (you should follow her anyway as she tweets out good and valuable information throughout the day). Watch a few of her broadcasts.
She uses the same tools in her unique way that we offer you to help make better decisions. Most importantly, she and her staff have a "plan" well in place before they put on a trade. They know why they are getting in, what the target price, what the risk averse-STOP prices are and what the inevitable "game plan" should and could be. But they are always prepared for the trade not working out as planned. That is the beauty of having a tight disciplined investment process. It is the same whether you are using Alpha Rotation, Nasdaq or Small-Midcap All Stars or Complete ETF. All our work builds on the same risk-averse investment discipline.
As I mentioned to you in my Outlook last week, I/We are not prognosticators. I have no idea what may occur going forward. Clearly the markets do not like higher interest rates and the prospect of higher inflation. But earnings have been good with 79% of companies beating their quarterly expectations. Plus, the $1.9 trillion stimulus bill was just passed, and the economy is reopening.
My guess is that a near term rebound is in the offing. Yet, we do not factor in our guess or belief of what will happen in the market. We review our indicators, react accordingly, and let whatever happens play out. I will say that I believe we are still on the roller coaster and while enjoying the upward hill on Friday, we may be setting up for the next drop. Technically we have done some damage that may take time to repair.
Until that happens, I suspect it will be a WILD(ER) Ride! Stay patient and manage your risk.
Here are this week's latest highlights:
- Risk Gauges are still in bullish mode ignoring the volatility
- US equity benchmarks closed mixed, with the QQQ's down -1.7% for the week while the Dow Industrials up+1.87%
- The QQQ's closed under its 50 DMA with its slope turning neutral to negative and is now down YTD.
- Volume patterns across all four US equity benchmarks are showing moderate distribution
- Long Bonds (TLT) reversed its attempt at mean reversion and looks like a multi decade reversal of lower rates is underway
- The Modern family is showing a major shift is underway with leadership shifting to the Financial Sector (KRE) and Transports (IYT) while Semi's (SMH) and Biotech (IBB) are weak
- Market Internals / McClellan Oscillator and Volume patterns are still in bear territory but bounced ff recent lows
- Growth stocks (VUG)accelerated its underperformance verses Value (VTV) and was this week's highlight
- Gold (GLD and GDX)) and Gold miners once again got hit hard as rising interest rates and a strong dollar continues to dampen the yellow relics appeal
- Soft commodities (DBA) and Energy (USO) continue to perform well with the prospect of the economy reopening
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Best wishes for your trading,
Keith Schneider
CEO
MarketGauge
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