Good Evening Folks
Been out TDY so wasn’t able to update until tonight. No cool charts but long story short I want this week to come to a close before making any decisions on leaving G-Fund, where I am now. As many know, the markets sold off and crashed pretty hard a few weeks ago. Soon after that, likely (however I own no crystal ball…) “bargain hunters” stepped into the game and bought “cheap” stocks and thus pushed the indexes back up. We had some decent high volume days, with a close price higher than the open price, indicating accumulation. There is a difference between a “bargain hunter” who is a large fund or institutional investor buying “bargains” (cheap stocks, TSLA was $250, now it is $220, a “bargain”) and the investor who is basically voting on the economy via huge buying power and vacuuming up everything in sight because he thinks in 1, 2, 3, years, the economy is going to be booming and therefore his investment will pay off. My opinion is the latter example sold-off in early October, and the bargain hunter came in last week and did some buying, bringing his metal detector to the beach and picking up hidden coins and gems amongst the sand. I don’t think the bargain hunter group can overpower the earlier sell-off group but I have been wrong before…
With that said, recent volumes have started to dry up, and it is looking like the same behavior from August, when the index went up, but on low volume.
In addition, market reaction to today’s FOMC statement was muted at best, also what I call “less than enthusiastic.” The statement discussed the end of QE (Quantitative Easing) which most feel has already been “priced into” the market, but I guess that is my point. If indeed priced in, what triggered the recent sell-off in first week of October ? It is not known (and only via watching the indexes) if enough buying power exists to truly reverse the bearish signals from a few weeks ago. The markets could have said “ok, cool, that’s what we expected [QE Ending], no changes, lets rally today”, or could have said “wow, yes, it is confirmed, QE is over, the world is ending, time to go down” but they just didn’t do anything. I am intrigued by this reaction (or lack of reaction).
In my opinion the bulls (believe the market will go up) will wrestle with the bears (believe market will go down) for a few weeks and THEN a solid direction up or down will be determined. Also note my “mid-November” hypothesis posted prior to today.
I think that while this wrestling match is underway, we need to stay out of the ring. I remain 100% G-Fund (yes, possibly overly conservative, but remember, none of my subscribers who were in G-Fund lost any money August-Present).
Lets allow the the week to close out and take another look at it. Remember a past example of dying dogs and one last strong kick: A strong up day (or two) does not mean we immediately dive back into the sometimes dangerous stock market waters. I prefer to see an overall behavior change and sentiment shift before I take action. The neighborhood bully who is on his best behavior for two days at Grandma’s does not then make him an angel.
Enough goofy examples….you get the idea….
Happy Halloween and talk to everyone soon…
- Bill Pritchard