We, like many fundamental and technical analysts continue to wonder how and why these markets continue to move higher and higher. Two confirmed reversal signals were spotted a few days ago and were totally negated on Monday, the 20th. This further suggests the markets are not ready to take a big breather yet. This has become a very consistent theme, whereby at the very last minute the Plunge Protection Team (the Fed) comes in and saves the day at the last minute.
So how do we deal with all of it now? We believe volatility will increase as we approach the upcoming election and therefore will employ some short-term trading tactics to “capture” profits when opportunities present themselves until our technical indicators signal the recent bullish trend has come to an end. Another “note of caution” around 1000 corporate insiders have begun selling their company stocks. These are the same insiders than began buying when the market bottomed back in March. Therefore, we'll continue to choose investments accordingly, continue to exploit what we believe to be the right stocks and ETFs, and look to position ourselves in a way that not only provides good reward, but mitigates as much risk as possible along the way.
What's happened over the last few months where the state of the economy, unemployment rates, small businesses, GDP, consumer spending or anything of the sort seems to have no effect on the market is similar to what we saw in the Dot-Com Bubble back in the late 90’s to early ‘00s timeframe where the market completely disconnected from the reality of the environment fundamentally and technically.
Lastly, we are led to believe that COVID-19 is the single biggest health disaster in the history of America. Although the markets continue to tell us it is nothing more than a bad flu while the media is sensationalizing the number of cases and death rates day after day.
There is no question we’ve adopted a pretty conservative stance since these markets bottomed back in late March (holding a lot of cash) as we felt obligated to be careful through this entire COVID issue.
P.S. On the 23rd and 24th of July, we began seeing a sell-off in the market and only time will tell if the Fed jumps in for yet another “rescue.”