04-28-2020: The Market is Never Wrong

I have opined here, ad nauseam, about how the market has and is ignoring the massive risks of restarting a totally stopped economy. I have delineated reason after reason why the assumptions that the market is making regarding the speed and success of restarting the economy are far, far too optimistic. I have attempted to introduce logic into the analysis of not ignoring the massively bad earnings reports and the lack of any kind of forward guidance from almost all publicly traded companies.


But, the market has said and is saying, 'Happy days are here again... time to buy, buy, buy!' And, as I have also said on many occasions, "The market is never wrong."


So, as much as I hate the fact that the list of unknowns and unknown unknowns (whatever they might be) are being ignored by this market, I have learned the hard way that the short-term trend of the market can often be far more profitable to follow than the long-term trend. And, the short-term trend is bullish. This morning, I have moved from mildly bearish in most of my holdings to mildly bullish.


I am delighted with how well our high-yielding stocks are booming higher in the Diversified Income strategy. It is not often you can get a near 50% profit in a high-yielding holding in less than two weeks, yet that is exactly what we are seeing.


This morning, I am moving to about 30% long in Tactical Growth, 20% long in Total Market, 20% long in Ultra and 20% long in Ultra-Max. I was already 15% long in Diversified Income and am looking to increase that a bit, as well.


You will note that I am still very heavily weighted in cash. The market is never wrong and with it up nearly 300 points today almost completely based on the 'hope' that the economy is on a V-shaped recovery, I will go along with it, but I do not trust the judgment of this market. So... we'll stick our toe into this excess exuberance and see if we can pick up some gains. Hopefully, this trend will continue long enough to get our stops above basis before the market decides that hope does not always result in the desired outcome.


Now is the time to be nimble and to not fight the tape, but it is not time to throw caution to the wind. All of our strategies are outperforming the market this year (year-to-date) and it is my goal to keep that trend intact. So, my very cautious move into the a bullish bias is coupled with a very tight stop loss strategy. We might get whipsawed, but if we do, our stops will mitigate the downside losses. I am raising stops every day when a holding moves higher in price.


If the market continues to move higher, we will ride this trend. If it reverses course (and that could happen at any time), we will stop out; hopefully with some decent profits. If the reversal turns into a bearish trend, we will be right back into the market with inverse ETFs where/when possible.


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