03-12-2020: Worst Market Day since Black Monday

I got a phone call a few minutes ago from a potential client who started out the conversation like this, "How much money did your clients lose today?"


I was a bit taken aback by the question, but said to him, "My clients made money today. In fact, depending on the strategy, many of them made a lot of money today... How did you do today?"


He said, "My current advisor lost me a ton of money today and I can't take it any more."


As the conversation continued, I learned that his current advisor believes in more of a buy-and-hold approach; holding high-quality, blue-chip stocks, along with some hedging.


I explained how we work... that we got out of our blue-chip stocks in mid-February when our investment bias switched from a bull-bias to a bear-bias. Then, we began getting into inverse ETFs. The biggest problem has been the massive day-to-day reversals in the market, but we have weathered through those events quite nicely.


Yesterday, at the close we went completely to cash in our growth strategies. Why? Because yesterday, the market crashed lower, generating very solid profits in our inverse ETFs. Then, because risk of a trend reversal was so high since the President was going to have a major speech regarding the coronavirus and the economic impact, it was possible that today would be a huge up-day in the market.


But, the President did not offer a 'worst-is-over' speech... no, it was more of a tough days are ahead of us speech. Probably exactly what we needed to hear, but not what the market wanted to hear. Today's massive sell-off is what followed.


So... this morning, I legged us into some inverse ETFs. Then, early this afternoon, the FED parachuted into the fray, offering trillions of dollars of stimulus. The market shot higher, cutting the day's losses in dramatic fashion. I know, from our quant-software, that the trend is bearish and will continue to be bearish until it doesn't. As such, I watched the market rise... 100 points... 300 points... 1,000 points... and then, it began to falter. When the falter turned into a trend lower, I legged into more inverse ETFs.


The market sold off into the close, down nearly 10% for the day. The talking heads on the financial networks were clamoring to explain why their buy-and-hold strategies are "cushioning" the loss. Investors do not want cushioned losses. They want profits and if they can't get profits, they want no losses. That is exactly our goal. That is exactly what we generated for our clients today.


Our ULTRA-MAX model was the best performer today; up more than +1.5% while the market was down almost -10%. Year-to-date, the model is up over +21% while the S&P 500 is down over -23%. The strategy is beating the market by 44%! And, no that does not include management fees (1% to 2%, annual) and you know that past performance is not a promise of future returns. But, being up more than +21% in just the first 11 weeks of the year is quite an accomplishment.


Where we are: Investment bias is bearish. Holdings are cash and inverse ETFs. Stop loss settings on all holdings.


What I expect in the near-term: Market moves lower. FED action had no impact, meaning that for now, they are not a factor in what is driving the market. The coronavirus and the unimaginable fall-out from the disruption of the virus, along with the Saudi price war on oil, could see this market move a lot lower before it bottoms.

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