A few observations

Lets take a look at the neartermed trading patterns for the SPX 500 and TSX 300 today. We’ll also cover a few musings for your investment consideration.

Why you need to stick to your investment plan

Here’s a lesson on sticking to your plan in any discipline:

I have been racing bicycles for more than half of my life, now as an “age class” racer. Typically I pick a number of smaller events each year that I uses as “training” races, along with 2-3 bigger events to prioritize as key objectives. One such “big” race was in Florida. It was called “The Intimidator”–and it was indeed a challenge, even for this experienced old dog. I really wanted to win the event, and I am happy to say that I did. Leading into any significant event, one must follow a plan. Every aspect of optimizing your race must be covered. This includes nutrition before and during the race, sleep & recovery, and of course training – which includes a taper coming into the race. It includes equipment choice, having a race plan, pacing strategies, fatigue management, and points of maximizing personal advantages over your competitors.

The Intimidator event was to do 7 laps of a course, and it was a “no draft” time trial type race. As I came across the finish,  one racer in my age category began to rant that I had missed a lap. He loudly proclaimed to all around that I needed to get back out and complete my final lap. Of course, coming into the end of an event like that one, I was massively fatigued – my brain wasn’t as sharp as it normally would be. Could this competitor be right? Did I blow the race by missing a lap? Oh, no!!!

I quickly asked a race official if I screwed up. Because laps and finish times are officially counted via electronic signals coming from a bracelet you wear – it was confirmed I had indeed done the 7 laps. In fact, I was fast enough to have lapped my loudly protesting competitor  – he had done six laps in the same time I had done the full 7! I guess his ego could not believe that he could be lapped.

Why do I bring this up in an investing blog? Well, I am trying to illustrate a tendency that ALL traders have.  We tend to second guess our strategy if the outside world of “experts” are calling for an opposite direction than our trade. I cannot tell you how often this happens. Last year, we saw several head-fake rallies where the experts began calling for “the bottom”. ValueTrend maintained our cash positions during those rallies. It was hard. After all, the competition, so to speak, was yelling at us that we were doing something wrong. Get back out there and do another lap by entering the market , dammit!

We stuck to our guns by following our system then, now, and will in the future. We stayed in cash. You too need to exercise your trading plan as perfectly as you can. There will be sources trying to convince you that you are wrong. Hey, they might be right, just as that competitor may have been about my exhausted brain’s inability to count laps. But you need to center yourself, go back to your rules, and follow them. As an investor, you need to ignore those who would influence you, and follow your rules. A system, as I always say, will save you from yourself. Take my Online Course to develop a system for yourself, if you haven’t already.

JP Morgan suggesting more poop to hit the fan

As J.P. Morgan chief economist Michael Feroli said last week: “There’s an old saying: Whenever the Fed hits the brakes, someone goes through the windshield.” It’s still unclear how many other companies and financial institutions didn’t have their seat belts on.

Speaking of poop. I’ll be doing a video soon on dog-stocks to avoid, and avoiding stepping in the refuge of these dogs. Stay tuned. 

Still cautious on Canada

I have made it clear that I am a commodity bull, and that Canada is clearly a leader in that area. I have also raised some technical and fundamental concerns surrounding the Canadian dollar and broader economy in this blog. Read it if you have not. I am not alone in this outlook.

When one of Canada’s most respected and globally influential business leaders calls Canada broken, we need to listen: Frank Stronach: Is our democratic system broken? (msn.com)

Neartermed technicals suggest market is trapped between a rock and a hard-place

Here’s a daily chart of the SPX 500 and the TSX 300. Note that resistance seems to be setting up tent at the vital resistance zone of near 4100 for the SPX, and near 20,500 for the TSX. Its quite possible that we will see continued volatility as the market tests and fails at or near those key levels. If prior support of around 3800 on the SPX and around 19,000 on the TSX are not broken, the news isn’t so bad. That type of behavior (bounce from support, fail at resistance) is how a base is formed after a long bear market like in 2022.

Keep in mind – a break of support by any meaningful degree can imply a washout spike to the downside (ugly!). That happened in early 2009 after the 2008 bear market trend. Still, it was that markdown in March of 2009 that ended the bear (albeit another rally and fall happened after that washout to rid the market of weak hands). On the positive – a meaningful break of resistance implies the base is over and a new bull has arisen.

 

6 Comments

  • “Bill Ackman slammed US Secretary of the Treasury Janet Yellen for walking back plans to support depositors.

    Yellen, who previously made assuring comments about protecting regional banks, stated on Wednesday that she had not considered or discussed “blanket insurance” for US banking deposits without the approval of Congress as a way of stemming the threat of further bank runs.”

    Conclusion: things may unravel in the banking system, with runaway inflation and social unrest.

    Reply
  • Hi Mike and Keith,
    I heard a little further commentary on this topic. From what I deemed, Yellen doesn’t want to propose legislation for Congressional approval for that blanket insurance on deposits as that would cause all kinds of political strife. Would Congress even support such a bill? Likely they would not!
    However, without that blanket insurance on deposits which would require Congressional approval, they (the Federal Reserve)can still apply stop gap measures as required to prevent a run on the banks like there was in the 1920’s.

    What’s your take Keith?

    Reply
    • I don’t have an opinion on that, but if I run across info in my research subscriptions I will post it

      Reply
  • Hi Keith,
    I too have noticed that the S&P has been, quite surprisingly, holding above the 3800 despite this run on deposits from some of the banks.

    Since the run on the banks is not causing a washout, what kinds of situations MIGHT trigger a break to the downside and a washout? Granted these situations might not occur at all. Not trying to predict per se, but just trying to be prepared in the event that one of these things might happen.
    How much cash are you holding atm (at the moment).
    Congratulation on your victory!
    Wendy

    Reply
  • Love reading about your cycling. I haven’t been on my bike since last September. Age matters. After a 60 or 70 km ride my shoulders were aching from putting so much weight forward. So I kinda burned out.

    Reply

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