Year-to-Date Strategy Stats as of COB today:
+29.86% : Turner Quant Advantage (TQA)
+ 8.96% : Tactical Growth (TG)
+ 3.70% : Diversified Income (DIS)
+ 6.10% : Aggressive Growth (AG)
- 2.23% : Total Market (TM)
+ 4.63% : S&P 500
I got a call from one of my (newer) clients today with the following question:
"Should I put more money to work right now or is the market about to correct?"
Internally, I had to sigh just a bit because, obviously, I have not done a good enough job explaining my approach to investing. I work very hard at trying to teach all of my clients my market-directional approach to investing. But, as much as I want otherwise, sometimes I just do not get the job done in a sufficient manner. Otherwise, the client would already know my answer to the above question.
Don't get me wrong... It is a very good question.
In my world, which does not have a crystal ball, my answer to the above question is: "Yes and I don't know..."
Yes, you should put more money to work right now because the market is in a bullish trend and that trend will last... exactly... until it doesn't. This leads to the second part of the question... "Is the market about to correct?" Don't know... No one knows... Certainly, I don't know if that is about to happen. None of my indicators are screaming that a correction is in the wings... well... maybe there is a 'little' indication, since the NASDAQ is in an overbought condition. But, other than that one index, almost all 20 of my primary indicators are either bullish, or at worst, neutral.
I can tell you this much, though... My TMI (Total Market Index) is showing the market is 2.04 EM's above its 200 DMA and trending strongly higher; almost exponentially trending higher. In fact, it is at a lifetime high and trending strongly higher. So what, you may (very rightfully so) ask?
Well... When the TMI gets to 3.75 EM's above its 200 DMA, that will trigger a 'go-to-cash' investment mindset and that means I start raising stops A LOT and it also means that, depending on the portfolio model, moving some capital into inverse ETFs. The market is 1.71 EMs (approximately 12.6%) from being overbought. 12.6% is a LONG way from where we are right now. To keep this in perspective, that would put the DJIA at about 31,000! Is that level possible before the November 3rd presidential election? In this market that is totally disconnected from economic reality, sure! Anything is possible.
But, just to make sure you do not throw caution to the wind and start buying everything from bitcoin to horse feathers, let me hasten to add that today 'could' have been the high in the market and starting tomorrow, the next major swoon to the downside will begin.
You see, I know exactly what HAS happened in the market (that's public information and totally measurable) and I know FOR CERTAIN that the current trend will continue until it ends... but I won't know if it ended today until some time has gone by... days... maybe weeks. It all depends on the trends and the mother of all trends is the 200 DMA of the Total Market Index; which as mentioned above, it steadfastly trending from lower left to upper right.
I will not be surprised to see some (could be significant) market volatility over the next few weeks. This may trigger some stop outs in some of the five model portfolios. The TQA model has the widest stops and is designed to weather the garden-variety whipsaws; but that also means it has the greatest exposure to NAV swings on a day-to-day basis, as well. The TQA model is not for the faint of heart, risk averse or less than accredited investor types.
I do expect the Dems and the White House to eventually come to terms on another trainload of sugar. Lots of people are getting very low on sugar and without a way to generate their own sugar (a job), they will need some assistance from Uncle Sugar. I suspect that politics are playing a deleterious role in the negotiations. One side wants chaos and pain to continue long enough for voters to swing their support to them; the other side wants to get as much sugar into the pipeline as possible for the benefit of everyone negatively impacted by the CORONA virus, and at the same time, keep those folk onboard come the election. If you don't know which side is which, may I strongly suggest you do some research into the subject and/or watch more of the most watched network on TV. (How's that for dancing on the head of a pin without alienating either side?)
Why bring up the dissertation on sugar and take the risk of swerving into a political quagmire? Good question and it has nothing to do with politics... It has everything to do with the market.
As I have said on numerous occasions, I believe (another word for "believe" in this context is, "guess") there is a floor in this market and the White House will do everything in its power to keep that floor in place and rising if at all possible. So, when our <shudder> representatives finally quit genuflecting and get down to the business of governing on behalf of their constituents, and pass the next relief (it's NOT a stimulus) bill, I suspect the market will move appreciably higher. Since we have a bullish investment bias and fully invested in all but the TG model for the moment, a big move higher in the market will (likely) be good for all of our client portfolios.
But... just in case I am wrong and the wheels start falling off tomorrow, we have stops in place to move us safely to cash and if it is, indeed, a train wreck, I will be delighted to make my clients some money on the way down with inverse ETFs.