Shorter termed patterns to consider

November 11, 202010 Comments

As regular readers know, since mid-summer we’ve been POUNDING THE TABLE saying that stock markets were too focused on overpriced, overbought technology and “stay at home” names like Amazon, Zoom, Peloton, Facebook, etc. It took patience to avoid buying these overdone names. But we held our ground.

Instead of buying hype, ValueTrend bought value stocks. We bought dividend payers trading at good multiples. We bought stocks that will benefit from inflation, and stocks that would benefit when the “normal” economy re-opens.

Its paid off.

In September and October, and November so far, the ValueTrend Platforms outperformed broad market indices. We’ve been vindicated as money rotated from growth to value. We still feel value stocks are the place to be.

But in the near-term, we should consider the potential for the value names to pull back a bit. Some of the value stocks we bought just a week or two ago have had massive rallies this week. A good problem. We chose to sell a few of these stocks today. We anticipated certain price targets to be reached within a number of months. Instead, we reached them in a week or two. This is not the type of move that lasts without a pullback, normally. We materialized that upside by selling a few of these fast movers. We now anticipate buying many of the names back, along with new names upon a near term correction.  We remain focused on value stocks. Any neartermed pullback should provide investors with new entry points.

Below is the value index chart. Note the gap up, and the overbought neartermed momentum signals (RSI, stochastics) on the first two indicators below the daily chart. Sometimes gaps are filled, implying a pullback in the near-term.

The weekly chart (not shown) is not overbought. So any pullback will likely be very shallow and short. Take advantage of it.

The next level in Wealth Management

If you, or your friends and family are not benefiting from the current shift in the markets, do yourself a favor. Contact us. We’ll explain how we can manage your money as prudently and conservatively as we do ValueTrend clients. ValueTrend tends to appeal to conservative investors with household investments of $500k + registered, non registered, TFSA, RESP, corporate accounts combined.

Also…Feel free to send the link to this blog to your friends and family. The more readers of this blog, the more ideas we can share together. On that note- please post your comments below!

10 Comments

  • Peloton and zoom in particular on the monthly charts look parabolic and ripe to correct in an abrupt way

    Reply
    • Adding to your comments Dave – take a look at their PE ratios
      Peter Lynch once said that a business has to have a “moat” (like a castle) around it to remain on top of the heap. You could say that AMZN, despite its overbought/overvalued status, will nonetheless remain on top because they were first in the game, and have built that moat by being the go-to. Same with MSFT. Once could possibly say that about ZOOM, they have built the brand-name and best product in at-home conferencing. But they too are way overbought and way overvalued. Still, I think they may survive and thrive (I don’t onw any and wouldn’t at this point, so this is a long view)
      But Peloton- there is no moat there. Anyone can get in on their game and its really not that inventive – their model could be duplicated by any of the big tech names and they would be blown out of the water. In fact, coming from the bike training world, I can already tell you that there are many companies offering similar products and on-line training that makes Peloton more of a flavor of the day rather than superior or even sustainable as a unique offer.
      Back to your point, yes, these names are goofy overbought and goofy overpriced. I avoid them like the Black Plague of The China-Virus. For now, anyhow.

      Reply
  • Hi Keith,
    Thank you for your very helpful informative view points on the blog.
    Can you please tell me where you think is the support level for gold and what is the percent that you hold in your accounts?
    Thank you and be safe.

    Joyce

    Reply
    • Gold seems to have neartermed support just around the current point of $1850. Same with the producers. We were near 10% gold a while back, reduced it to less than 4%, back to a bit over 5% now, and are looking to leg in to get another 2-4% back into the metal.

      Reply
  • Hi Keith,
    I am wondering if today’s pullback is related at all to Trump’s continued denial that he has lost the election. Could we be in for some volatility until he concedes or is escorted out of the WH in Mid-January? What do you think?

    Reply
    • Wendy I believe that we should spend no more than 3 seconds a day worrying about Trump and his antics.
      The market is dialed for a good move. Yes, virus concerns, senate elections will cause some volatility into January, and perhaps Trumps rants will push the markets around a little. But the setup is bullish. TINA is in charge. Don’t argue with TINA, she kicks butt! (TINA=There Is NO Alternative…to stocks..given low rates).

      Reply
  • Hi Keith,

    What do you think of Canadian banks and insurance (SLF and MFC) as entries around current levels for an investment (not a quick trade)? If you were looking to invest in Canadian banks would you put your money into Cndn banks approaching Feb. levels (e.g. CM and RY) or would you look more to those still lagging like BNS and TD?

    Thanks for your thoughts,
    Lee

    Reply
    • Lee–we own BNS in our income platform but its pretty range bound. We don’t like the sector for its upside but the dividends are likely secure.

      Reply
  • WEEKLY RECAP (DAILY CHARTS).

    IEF (BONDS) TO SPY (STOCKS): FAVORING STOCKS.
    JNK (HIGHER RISK BONDS) TO IEF (LOWER RISK BONDS): FAVORING JNK (HIGHER RISK).

    $SPX: ABOVE 38.2% RETRACEMENT, ABOVE 200 DAY M.A.

    MARKET BREADTH (FOR FRIDAY, NOV. 13, 2020).
    ADVANCING (NYSE) 2570
    DECLINING (NYSE)515
    ADVANCING (NASDAQ) 2643
    DECLINING (NASDAQ) 90

    $VIX (ON FRIDAY): CLOSED DOWN 8.84% (LOWER LOW)

    -HEALTY CONSOLIDATION
    -LONG TERM REMAINS CONSTRUCTIVE
    -VIRUS OUTCOME VARIABLE
    -MORE RELEVANT ISSUE IS MARKET BREADTH IN COMING SESSIONS

    (EXCERPT: CIOVACCO CAPITAL MANAGEMENT, FRIDAY NOV. 13, 2020).

    Reply

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