06-26-2020: Beginning of the End... or End of the Beginning?

Updated: Jun 28

As I alluded to in yesterday's blog, it's days like today (and, especially like this past Wednesday) that you would be far better off playing golf, fishing or simply day-dreaming than watching your portfolio's moves lower while the S&P 500 sold off nearly -2.5%.


Speaking of selling off... This week market (S&P 500 down 2.74% for the week) which did negatively impact our portfolio models. Tactical Growth lost about 1.65% (about 1% less than the S&P 500) and Aggressive Growth lost only about 0.01% (significantly less than the S&P 500). I'll have more details on each of the portfolio models in Monday's Client Letter.


There is a plethora of guessers trying to convince you that they know what the market is likely to do in the near term.


You're as good a guesser as anyone you see on CNBC or Fox Business, so you would be better off just using your own logic to guess where the market is going... if that's what you want to do. You have the same odds as anyone else in guessing right or wrong. But, using all those brain cells to hazard a guess about the market is probably an effort in futility. Yes, you might guess right, but the odds favor you guessing wrong about as many times as you guess right.


I don't guess...


Now, before you jump to the conclusion that I am some kind of ego-maniac, let me provide you with a few facts:

  • The 200-day moving average of the Total Market Index ("the market", which is a composite of the S&P 500, the Nasdaq, the Dow and the Russell 2000), in spite of the sell-off this week, is still in a bullish trend.

  • The current 200-day moving average of the market will absolutely continue on this bullish trend until it doesn't. By the way, we are watching for that change in trend every day and every moment of every day.

  • A sudden reversal in the market on any given day could be severe. We saw such a sell-off just this past Wednesday. Today was another pretty severe sell-off. This is why we have stops in place. Today, several of our holdings hit stops and that cost us a little in unrealized gains, but by moving to cash in those instances, we took risk off the table. If you can weather a tough market week like we've seen this week and see positive gains while reducing risk, you have done well. Now, before you jump on the email you want to write me saying that all of our models didn't move higher this week... yes, I know that. Our Total Market model, which is designed to follow the market, was down about the same as the overall market; but, as of today, it is back to 100% cash and safely out of harms way. And, while our Diversified Income model lost some ground this week, it lost less than half of what the market lost.

Our quantitative analysis algorithms are doing exactly what they are supposed to be doing... measuring the market and indicating when to buy and when to sell; regardless of what the talking heads think. While the market can suddenly reverse course at any moment, the math we use tells us when the odds are in our favor to be buying, selling or sitting on the sidelines (or any combination of these actions).


Have a great weekend. I can't wait to see the results of the number crunching that's going on right now in the bowels of our computer systems; but then, I'm a data nerd and loving it.