04-20-2020: Negative Oil? Really??

Let me start out by saying I am not into oil futures, so there must be some logic to why the futures for oil today fell into totally uncharted territory. At one point, oil was down to a negative $50 per barrel. I realize a lot of that bizarro bid/ask on options expiration day must make some sense to someone, but the only thing I can come up with is, actions like this have never happened in history and, are we likely to encounter more Twilight-Zone events as this dead-in-the-water global economy struggles for air. Is there a ventilator big enough for a global economic pandemic?


And, on top of this head-shaking condition in the oil patch, I am now hearing that the market has completely written off 2020 and has its sights set on 2021. Why does an image of an ostrich with its head stuck in the sand pop into my mind as I write these words? So, I guess we are supposed to just ignore the current economic conditions and assume that all will be right with the world in just 8 more months. Somehow, that argument is just not winning me over.


While I see everyone laser-focused on solving the COVID-19 pandemic (as they should), most of the press and seemingly the government is ignoring the bigger pandemic... the global economic pandemic. And, I am afraid that anti-bodies, therapeutics, vaccines and social distancing will not cure the economic pandemic that will impact every single living human being in the world, one way or the other.


Well... maybe the market sees this economic pandemic and maybe it doesn't. Today, the market dropped another 600 points on the Dow... The S&P 500 dropped 1.75%. Yet, our Tactical Growth model moved higher today, which is always a good thing to see. I am pretty sure the market is, for the most part (oil notwithstanding), ignoring the economic pandemic and assumes Uncle Sugar will bail everyone out by the end of the year. Well... as I often say, the market is never wrong. Blind, maybe, but never wrong.


So, just what does that mean, exactly... "The market is never wrong." It's quite simple, really... It just means that if the market moves one direction while your trades are in play for the market to move the other direction, your trades are not in sync with the market and if you want to make money in the market, you have to either be in sync with the market or willing to take on a ton of risk. This is why buy-and-hold is, imho, one of the riskiest strategies ever devised. Holding on to fundamentally strong stocks that get crushed in a bear market is simply wrong... actually it is simply stupidly wrong. Since no one knows where the market will be next week or next month or in 2021, betting an investment strategy on the guess that your trades will be on the right side of the market at some point in the future is substituting smart, trend-based investing for a buy-and-hope strategy. And, hope is a terrible investment strategy; especially if you guess wrong.


For you skeptics out there that want to take issue with the foregoing paragraph, let me hasten to add that not every trade works for me, but the big difference between my approach and the buy-and-get-your-butt-handed-to-you-in-a-bear-market approach, is that I am not afraid to go to cash and get out of a bad trade if if moves against me more than my volatility-based stop loss. You see, I stick with the market as long as the market has a trend that I can stick to. If it gets too frenetic, I just go to cash and wait until a trend develops. And, as I am prone to say with some degree of repetitiveness, the current trend in the market will last exactly until... it doesn't. The beauty is, with math, you can measure exactly when that 'doesn't event', occurs.


Well... the after-hours futures look a little weak, so the market must think that negative oil is no big deal... all will be fine in another 8 months... just another day in the economic pandemic of a lifetime.


Stay safe out there... be nimble and don't assume the market is smart... it just might not be.