03-27-2020: Best Week Since 1938?

For all the starry-eyed optimists out there that believe that this week was the bottom, I hate to burst your bubble. While it definitely 'could' have been the bottom, did you notice when the 'Emergency Relief Bill' (aka, stimulus bill) finally got out the House, the market started tanking and ended the day almost at the lows. Was it simply a 'sell-the-news' event... or is reality beginning to rear its ugly head... that bad economic news is coming at us like a freight train and the $4 trillion bill that got signed into law today will do absolutely nothing to slow that freight train down.


Yes, this was the best week in the stock market since 1938. But, the trend data overwhelmingly support a bearish investment strategy. As a result, the plan this week was to sell into the rallies and, as a result, I bought inverse ETFs almost every day that the market boomed higher. Yesterday (Thursday) at the close (another up-day in the market), I moved our ULTRA-MAX strategy from 80% to 100% short the market in two 2x inverse ETFs. This afternoon, I closed out all of our short positions (inverse ETFs) in Tactical Growth, Total Market, ULTRA and Diversified Income. This was to take risk completely off the table in those holdings over the weekend. In ULTRA-MAX, I kept 50% invested in its 2x inverse ETFs.


Just because this was the best week in the market since 1938, it did not change the overall trend of the market, which is bearish. In prior missives, I have listed many reasons why the data support a bear-trending market and nothing this week, including the passage of the $4 trillion Emergency Relief Bill.


I am anxious to see the results from our quantitative analysis algorithms once the week's data are processed. I'll get to see the first reports tomorrow afternoon. I am curious to see if all the sectors remain in a bearish condition and if we get a full "TIP Alert". A TIP Alert is when the 200-day moving average of the Total Market Index trends lower each week for three consecutive weeks. It is non-trivial for the 200 dma to change its slope from bullish to bearish or from bearish to bullish. Generally, these slope changes do not occur often and this is why this one indicator is so significant. No indicator can absolutely indicate how long a trend will stay in play, but this one tends to change less frequently than many.


So, while the market did have a good week, it is still down more than -21% year-to-date. All of our strategies are significantly outperforming the market for the year. The two best ones are Tactical Growth (up almost +7%) and ULTRA-MAX (up over +19%).


Next week could go a long way toward verifying whether this market is, indeed, bottoming or simply exhibiting a blow-off rally before the next big move lower. I'm leaning toward the latter... at least that's what the data support the most.


Enjoy the weekend and stay safe!

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