No charts today, just some thoughts.

I had a client question me early in the week as to why i might want to sell into the past 3 day rally. I answered that I don’t know how long the rally will last, nor do I know if it just briefly pauses and then carries on. Frankly, nobody does. But my client was wondering if we might get a V-reversal. If so, it would be foolhardy to sell. His point was valid. Problem being…again…nobody knows.

My solution (if you want to call it that) was to hold onto our existing positions (we are 15% cash) until the market pulls back more than a normal sub-1% pullback. Craig, our CFA and co-manager of our platforms, identified a few stocks that were most at risk. We determined that, rather than making massive moves, we would sell the weak puppies if we see a 1%+ pullback. Forget the 3 day rule for now, as everything moves in extremes of late. If that pullback turns back up in a a few days, we can re-deploy into better positions. If it continues down, we sell more.

Today we sold another 6% in our Equity Platform. This puts us just over 20% cash. We’ll await the moves into early next week before selling or buying activity. We sold the stocks that are most at risk, so it’s not much of a loss. Some food for thought:

Forward guidance may shock investors

2020 Q1 earnings season is starting the week of April 6 going into May. Companies will report earnings, and they will also report guidance on Q2 and beyond. Obviously, guidance will be negative. Current earnings forecasts are high.  Negative revisions, and the resulting forward P/E ratios may shock investors. Insolvency risk facing many companies will come into focus. Perhaps this is built into the market right now. Or, perhaps it’s not…


President Donald Trump said last week he might intervene in the clash between Riyadh and Moscow, while U.S. Energy Secretary Dan Brouillette said on Tuesday that one potential option could be an alliance between the U.S. and the kingdom. We hold 7% energy (doh!)–we will not be selling until more news comes out on potential stability plans by the powers that be in that industry. You might get a pop on news. Thereafter, reality is that demand will be low for some time to come, so we are not long termed investors.


Next week I’ll do a Bear-o-meter update. As a heads-up, some of the bullish factors mentioned in my last update have returned to neutral. Some remain bullish, like the excessive VIX levels. But breadth-momentum is somewhat normalizing. This leads me to think that we will get chop (not necessarily bearish action). More on that next week.