You had to have your big boy or, as the case may be, your big girl pants on today as the market took on multiple personalities at the same time. Wednesday is the proverbial "hump-day", meaning we are half way to the weekend (I love those old Geico commercials with the camel walking through the office calling out "hump day"), but as I mentioned in yesterday's blog, we could be seeing the middle of another "W" move in the market. Today, we got parts of the market on the way down and parts on the way up and, for the life of me, I can't think of a chart pattern that would explain what took place.
The market is never wrong, though, and the move lower in the Nasdaq this morning wasn't surprising given the large upside we've seen in recent weeks, but the move up in the DJIA and S&P based on industrial stocks is not something that I am particularly excited about. Stocks like BA, CAT, etc. have moved higher, but there is just too much downside risk in these stocks, in my opinion, given the fragility of the economy and the spectre of more China/US conflicts. Our risk rating is about 60% less than the S&P 500 (in the Tactical Growth model); something we work hard to achieve. I am not interested in adding a lot of risk to our strategies in this current market environment.
Regardless, I like what took place today from one perspective. The bifurcated movements in the cross-current trends solidified my objective to add more diversification to a couple of my strategies. If you are a client of mine, you know that ULTRA and ULTRA-MAX focus on one or, at most, two 2x ultra index ETFs. But, with the market unable to get into a decent trend and stay there, I want to spread our capital exposure into more than just one or two 2x ultra ETFs, so long as these additional ultra ETFs are very liquid and on a solid trend.
The after-hours market is up this evening. That doesn't mean it will be up in the morning, but barring bad news on the virus front, we might see another up-day. I am looking for a pull-back, though. I have some stocks and ETFs that need to be added to the various portfolios and I would like to buy them when they go on sale.
You might ask why I am so bullish when the US is on the verge of putting sanctions on China, the unemployment numbers are approaching 40 million, businesses are struggling to get back to solvency, and no vaccine for the COVID-19 virus is in sight. Yes... that is a tough question, but the market is oblivious (for now) in that regard. And, as I said at the top of this blog, the market is never wrong... stupid, maybe... totally blind, perhaps... completely consumed with the idea that a vaccine cures everything from the virus to a complete economic recovery. So... as long as the market wants to go higher, I will look for ways to keep us on that path.
But, it is a scary path we are on and that is why I am ready to move us back to cash at almost any sign that the market has snapped out of its myopic view of the future of this economy.
Yes, I am bullish, but very, very ready to go to cash.