I recall seeing green shoots sticking out of the cow patties in a farmers field on a ride one day. This market has certainly been a field of cow patties. But like the cow field, there are some signs that the bounce (green shoots) we are seeing today may follow through for a few days or more. I do feel that there is an above average chance for this rally (if it’s going to stick) to turn back down and selloff in one last death convulsion before the true bottom is seen.
So for my part, I expect to sell into this rally, while leaving most of my buying for the time when we either get more evidence of this rally being more than just a rally – or that final washout followed by a consolidation. Please read this blog for more on that pattern. Here are some green shoots that support the current rally, at least for now…
- Fed stimulation like never before
- China and Korea seeing virus under control
- North America seems to finally be “getting it” and cooperating rather than resisting common sense (aka the goofballs partying on Daytona beach during March break and ignoring requests to leave).
- Massive washout in sentiment and momentum indicators indicating capitulation.
- Our VT clients are typically more investment savvy than the average Investment Advisor or Bank client. So we don’t get the panic that 99.9% of those in our industry hear in their clients. However..In 2009 we had 2 clients sell within a few weeks of the bottom, despite ongoing conversations with both to stay the course. One person sold in Feb. 2009, the other (I am not making this up) sold on the very day and the very hour (no lie) of the low point of the market panic–March 2009. We always try to keep everyone calm and assured at times like this, but sometimes you just can’t. We watch for that as a sign of the bottom. We are hearing the fear, and some will panic–its human nature.
- A potential bottoming (hammer) formation on daily and weekly charts–per below.
- Finally: watch for follow through. If the rally fades late today, it’s less likely to have much more upside.
SPX weekly hammer
SPX Daily hammer
For what it’s worth, I eat my own cooking. Beyond some personal and recreational real estate, my entire portfolio is invested in the ValueTrend platforms. I am not the poor advising the wealthy. I have a good portfolio that was built a bit at a time. Like most ordinary people, I didn’t inherit a trust fund or large inheritance, and have never felt entitled to the support of others/ the government. Instead, I saved a bit at a time for my entire life, even when I made a very low income and “couldn’t afford to save”, to acquire what I have today. I don’t just talk about investing to others, I have believed in it since my 20’s.
I own the Equity, Aggressive and Income platforms, spread between my various personal and family assets. I don’t hold anything else. I am by default following my own advice. And like many of you, I don’t have a pension. So this is what I will live on some day. As such, like my clients, I don’t want to lose money. Yet, my accounts are down just like everyone else. We have dampened the risk in this market – but certainly have not avoided it. This has happened before. I didn’t panic then either. Hopefully, the fact that I am not panic-selling may inspire you to act similarly. I would not have been as successful in acquiring my assets, or building my company, if I had acted irrationally in times of stress – like now.
I hope that helps all of you.