03-26-2020: The Market's Never Wrong, but it Can Be Stupid

Question: How much of the stimulus package coming (eventually) out of Congress is designed to stimulate the economy? Answer: None. This is not a stimulus package; rather it is a subsistence package. It is designed to keep people from losing their homes and able to keep food on the table.

Question: How will the economy get back on its feet where the supply chain has strong demand and the supply of goods and services are plentiful when we are still locked in our homes for 2 to 4 more months? Answer: It won't.

Question: How many times has the world's global economy come to a complete and total shut down (a "sudden stop") and then recovered immediately after the cause of the sudden stop is resolved? Answer: Never, because this has never happened before.

Question: When was the last time we had weekly unemployment claims of more than 3 million? Answer: Never.

2-part Question: What percent of the S&P 500 companies do you think will have strong earnings reports and even better forecasts for Q1? How many of those companies will have better results for Q2? Answer: (this is a guess) Very few.

Question: Why is it that when the Fed announced that it will dump unlimited amounts of Quantitative Easing (free money) into the economy, the stock market barely moved? Answer: The Fed cannot backstop a pandemic and it cannot kick-start the economy when the economy is shut down.

Question: How many main-street companies that were just barely making it, but able to stay in business, prior to the pandemic, will be able to come back (or even want to come back) once the virus is under control? Answer: Unknown, but likely many will not come back.

Question: How many people believe that all we have to do is to "flatten the curve" for the number of infections to solve the pandemic? Answer: Too many. Flattening the curve does nothing to reduce the infectiousness or mortality rate of the virus... it only stretches it out into the future and help keep our hospitals from getting overwhelmed with sick patients. The good side to this, is that flattening the curve will buy more time for a cure or treatment to be found. The bad side is still keeps us in a shelter-in-place mode for a longer period of time and continue to exacerbate the ramifications of a total economic shut-down.

Question: Does finding a cure or effective treatment for the virus, solve our economic problems? Answer: No it does not. The economy will have to come back and that will take a lot longer than many think.

Question: Did the market this week give us an opportunity to sell into the market at better price points? Answer: Yes, it did.

If you believe the market bottomed this week, then you are not looking at the same data I am looking at. Granted, my data are backward looking, but even with the huge run-up in the market this week, the Total Market Index is still 2.92 standard deviations below the 200-day moving average. And, the 200 dma is still trending sharply lower. While this week 'could' have been the bottom, my data and my observations of market conditions indicate that we will, more than likely, retest recent lows and 'could' move much lower. But, that is merely a guess and I do not guess. My data tell me to be short this market and nothing yet has transpired technically, to tell me to do otherwise.

This is why I put a small amount of capital to work in inverse ETFs in Tactical Growth, Total Market, Ultra and Diversified Income. It is also why I went 100% into our 2x ultra ETFs in ULTRA-MAX today.

If I am wrong... meaning my data are not yet reflecting the true trend of the market, and that is always possible when markets make sudden trend reversals... then, we will stop out, move to cash and begin buying fundamentally strong, up-trending stocks and ETFs. If my data are correct and if I am interpreting those data correctly, we could pick up some great gains in capital appreciation in the next few days, weeks or even months.

I like to say, "The market is never wrong."... but, it can be very stupid at times and, in my opinion, it is dumb as a brick right now. We'll see in the next few days if I am right or wrong.

Stay safe, be positive, be glad that you are not trapped in a buy-and-hold investment strategy and having to worry about "rebalancing", which is a reserve term used by buy-and-hold investment firms to make themselves seem above the fray and never have to justify losing their clients' money.

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