This weekend will feature an interview I did with a BNN reporter today. Tomorrow, I will be on Market Call Tonight at 6:00pm
I thought I would do a super short and sweet reprint of some of the talking points revolving around todays phone interview. You can tune in to BNN tomorrow to hear even more on my market thoughts. But the bottom line is that I view the current market activities as the “beginning of the end”. That is, we are nearing, if not already at, the capitulation bottom regarding the Coronavirus market selloff.
I’m writing this at around noon on Thursday Feb 27th. Perhaps in a few hours we will see if the market can close higher than its lowest point of the day. This may result in a bullish reversal candlestick. We shall see. Here are my point notes from the BNN interview. Short and sweet:
- Big picture is bullish – evidence: market remains supported by 200 day SMA—even a small short termed break of that SMA is quite acceptable
- Big picture is bullish – evidence: support at 3000 (SPX) is being held, Again, a short break below is fine.
- Other bullish evidence: seasonal tendency is bullish to May. Also, sentiment is turning bullish (smart $ buying, dumb $ selling)
- Short termed picture was bearish just 30 days ago. Sentiment (smart/dumb) was goofy—dumb $ was piling in with 88% confidence!!! Meanwhile…Smart $ was selling hand over fist – only 23% of smart $ was bullish. In January– We raised 12% cash and also bought 6% in precious metals because of these cautious signals.
- Now that’s reversed per above comment. In the chart above, courtesy sentimentrader.com, Dumb $ (red line) and Smart $ (blue line) are reversing directions. Note the January 20th levels. As is often the case, smart money moves are ahead of the curve. Dumb money loves to buy high and sell low.
- Also, momentum was overbought – now its settling down. Note the move from overbought to oversold on stochastics, RSI and MACD below.
- Finally—two gap-downs on the chart this week indicate the potential for a capitulation bottom forming. Gaps are a sign of panic and fear, which often precedes bottoms. Two gaps in one week is very significant.
- We are legging in starting today. We will reduce cash from 12% to 9% today, then buy more if the market holds next week. Yes, it may fall more, so we keep some powder dry (cash and gold). But it’s highly likely we are at or near the end of the selloff, whether it’s now, or two weeks from now.
- We will also begin selling some of our precious metals next week if markets hold. Seasonals for them are actually weak this time of the year. We hold them only for risk reduction at this moment.