Taking some money off the table…

The S&P 500 has recovered to the previous highs of November 2019.  I’m concerned there might be a little too much re-opening exuberance right now.

So to lock in some profits, I sold the following positions:

  • BOTZ             Global X Robotics & Artificial Intelligence ETF
  • GOOGL         Alphabet
  • HACK            Cyber Security ETF
  • NVDA           NVIDIA
  • RYT                S&P 500 Equal Weight Technology ETF
  • UNH              United Health Group
  • XSD                Semiconductor ETF
  • YUMC           Yum China

I’m not worried about a catastrophic meltdown, but I am concerned the market has risen too fast and is ignoring some major uncertainties.  Namely:  Unemployment, China tensions, and the November Election.  You can listen to a brief 10 minute podcast explanation here:

If you’d like an even briefer explanation, here’s a 2 minute video:

Best returns and STAY SAFE !

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Suckers Rally coming to an END?

Has the seven week Relief Rally morphed into a Sucker’s Rally?  I hope so.  I’ve been waiting for another buying opportunity.

Today the S&P 500 was down 1.75%, not as bad as yesterday’s 2.05%; and unlike yesterday’s horrible close, today the index improved during the final minutes of trade. 

But things don’t look good.  Over the past three weeks the S&P 500 has been unable to retrace the April high, nor has it been able to get closer than 2% of its 200dma.  Today it also broke below its 20dma.

If the S&P 500 doesn’t find support at its 50dma (~2700) then it’s likely to drop to at least 2600.  At that point, it would even be probable that it could drop down to test the March 23 low (~2200). 

For long term investors, a drop to or below the 50dma would present an excellent buying opportunity.  As always, the exact bottom will be elusive and fruitless to try to pinpoint. 

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Bought Tyson Foods

The S&P 500 continues to ping pong around 2850. It has closed poorly for the past two sessions, especially today.

ALERT: today I purchased Tyson Foods TSN. It was a small position, no more than 3% of portfolio value…call me CHICKEN !!!

For a quick explanation of the rationale, please watch this short video: https://youtu.be/Ofe-N8b2EdQ

FYI- comments are always appreciated on the YouTube channel.  I may not have the opportunity to reply, but I do read them all.

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COVID Range Bound Recovery

The S&P 500 has been faltering for the past three sessions and is back near mid-April levels.  For now it’s range bound between the upper 200 day moving average and the lower 50dma.  Flip a coin to determine if the market will breakout or breakdown from here. 

Here’s my assessment of the current situation:

 MEDIA NARRATIVE

  • Second Wave of outbreaks as economies reopen
  • Declining corporate earnings
  • Depression level unemployment
  • Food shortages

TRUMP

  • Points blame at China and increases rhetoric about tariffs, reparations, and economic de-linking.

INVESTOR SENTIMENT

  • Investors develop amnesia about recent Stimulus intervention and demand more SPENDING.

What I find interesting is that today’s levels are similar to the peaks seen in Jan 2018, Sep 2018 & Jun 2019.  Back then the FEAR was Trade War, Tariffs, Impeachment…ultimately none of that static mattered and the Market went on to set new record highs.

I remain cynically hopeful for another dip, to be used as a long term buying opportunity.

FYI- watch for the next episode of the Wealthsteading Podcast, #312 will be informative & FUN !!!

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COVID confirmed breakout above 50dma?

The Market looked like it might take a dip due to poor economic data.  Then today it popped back up when Gilead announced positive results from their COVID-19 treatment trial.

Is this a head fake or a real breakout above the 50 day moving average?  It looks solid and the S&P 500 is only 2% away from its 200 day moving average.  I’ve been hoping for a secondary pullback so that I could take advantage of another dip.  But that opportunity might be fading.

Either way, I think this is still a buyable market.  The critical risks are:

  • 2nd wave of infections as the economy opens back up or during the Fall/Winter flu season.
  • Unemployment stays high.

Follow-on infections are a real threat, but just like a bad Hollywood horror movie, the sequel is seldom as frightening as the original.

Elevated levels of unemployment would be detrimental to some sectors of the economy, but remember what’s bad for Main Street, isn’t necessarily harmful for Wall Street.  As we saw after the Great Recession, laid off workers generally equate to higher profits for the Fat Cats.

S&P 500 corporate earnings will eventually surpass $170.  Zero interest rates will support escalated price per earnings valuations, likely above 20.  That puts the future value of the S&P 500 at or above 3400 (170 x 20). More than 15% higher than today’s price.

My math might be wrong, but I continue to see this “crisis” as a buying opportunity.

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