Updated: Feb 5
Year-to-Date Strategy Stats as of today:
+4.30% : Turner Quant Advantage (TQA)
-0.36% : Tactical Growth (TG)
+2.64% : Diversified Income (DIS)
-1.45% : Leveraged Index (LI)
+0.83% : S&P 500
Good Thursday evening...
My initial point in this evening's missive is for all the new clients who have recently come onboard with Turner Capital... My existing clients already know what I am going to share with you, but it is a good refresher for everyone.
The market is overbought. The market has not settled on a trustworthy trend. Volatility is high. Risk of a correction is extremely high.
As such... I am NOT buying in any portfolio right now, but that could change at any time.
Yes, I know you want me to trade, trade, trade. I know you are anxious to get that money in play. But, the quantitative analysis of the market data is not giving a good signal to buy long or to go short into inverse ETFs... We are at a tipping point which could go either way, but the quantitative odds favor a major move lower. Remember... the number one reason that you hired us is to protect your capital when risk is high. It can't get much higher than it is right now.
We are stuck in OB (OverBought) Land and the market just isn't giving us enough data to support a reliable trend one way or the other. If this market is going to correct, now would be totally fine. We are mostly in cash. If the market wants to boom higher, as the fundamental-talking-heads are forecasting, then that would be fine, as well. We want a strong trend... We don't care which one... up or down. We know how to make money with either.
Having said all of the above, I am more than anxious to put capital to work. All of my clients are probably itching to get their money working as soon as a trend develops, as much as I am.
If I was willing to take on a LOT more risk with my client capital (which I am not), I can see an argument for putting a little money to work in inverse ETFs every day that the market closes higher. My data are screaming that the likelihood of a correction is growing by the day. But, the data cannot give a date-certain when this OB market will collapse. While I am 90% certain that a correction will occur sooner than later, that is not 100% certainty. You do not want me betting your money that the market won't move 10% or 20% or more higher before it corrects... or even if it corrects. But, history has a way of repeating itself and, history tells us we are inching closer and closer to the edge of a cliff, metaphorically speaking.
Between the actions and/or inactions of our government that now has all three branches under the control of one party, and that party seems to want to play a totally different economic game than the prior administration, the future with regard to the economy is exhibiting no small amount of uncertainty. Then, there is the ever present COVID-crises, which has seen thousands of small businesses go away that may never come back. And, of course, there is the $30T in debt that is growing by the minute, and the $100T+++ of unfunded liabilities like SS, Medicare, Medicaid, etc., the likelihood of rising interest rates, inflation, weakening dollar... With the closing of the Keystone pipeline, one has to wonder what impact that will have on gasoline prices in the near-term which could crush lower income families. Any of these items (collectively or not), and many more, could be enough to pull the plug on this exponentially rising stock market and we could see a correction snowball rolling down hill at a rapid clip; something that is even more likely for the poor Reddit folk who own GME at massively over-priced levels.
My plan is this... If the market continues to move higher tomorrow and the open on Monday looks positive, I will likely put about 25% to 30% into the market (on the long side) with 0.5EM stops. If the market tails off tomorrow and opens lower on Monday, I will likely put 10% to 20% into inverse ETFs with 1EM stops. I may even play both sides with a combination of both long and short-biased trades... and, no, GME is not a part of my game-plan.
Now is not the time to throw caution to the wind and bet the farm. I am fairly risk averse in this market and you should be, as well.