Call Us


Last week’s update drew investor’s attention to the positive seasonal bias at work roughly from Halloween to Easter most years in the equity market. Studies have shown that this span of weeks has contributed almost all of the accumulated gains in the stock market over the last one hundred years or so. And, the period from Easter to Halloween has contributed almost nothing to the gains over the same period. The recent performance in the market, including this past week’s new all-time high on Friday, has once again contributed to this tradition of seasonal outperformance.

Given the very positive readings on an array of objective supply and demand indicators, the weight of the evidence continues to favor demand over supply. So, the seasonal bias, and the balance of objective measures of supply and demand, favor the stock market touching new all-time highs in the days, and possibly weeks, ahead. As long as the balance of supply and demand remains favorable toward demand over supply, then we will use periods of weakness as opportunities to put cash coming in from new clients , or excess cash in existing client accounts, to work in equities; regardless of how bad the news may become, or how unreasonable valuations may become. Neither the news, nor valuations, determine the price level of the stock market. The price is determined by the law of supply and demand, the only absolute in economics. Currently the balance of supply and demand, as measured by our proprietary indicators, favors demand over supply.


TATY is shown above in yellow with the S&P-500 overlaid in red and blue candle format.

TATY finished the week at a strong 156, and rising. As long as this big picture strategic indicator is painting out BOTTOMS in the red zone, investors may reasonably expect the stock market to have a positive bias, and enough residual demand to power periodic attempts to assault new all-time highs, in an ebb and flow type behavior. These attempts are likely to continue until TATY paints out a “Big Chill Warning”, which will likely become the first objective evidence that the balance of supply and demand may be shifting in favor of supply over demand.

Big Chill warnings have been highly effective at alerting investors to rising risks in the equity market, and at issuing warnings timely enough for investors to take action to protect accumulated gains, and/or their wealth. No indicator is perfect in this business of risk management, but of all the major top identifying methods I have studied over the decades, TATY is the indicator with the best record by far. Major tops are a gossamer like euphoria diffusion process, which is extremely difficult to measure objectively, which in turn makes it difficult to determine the price level at which market risks to invested capital may have become critical. TATY has a decades long record of identifying levels at which equities may have become vulnerable to the onset of a substantial correction, or outright bear market. Unfortunately, I’ve discovered no method in decades of searching, which can tell us in advance, if a correction may turn into a bear market, or if a nominal bear market may turn into major bear market.

Fortunately, our inventory of supply and demand indicators include some like SAMMY, which have a proven record of measuring and identifying resurging demand. These have a record of announcing the end of corrections, and/or phases of bear markets, or the completion of a major bear market in equities. This information then becomes critical to the decision to re-deploy cash as price declines are ending.


SAMMY is shown above.

SAMMY has earned an outstanding record at identifying resurging demand following substantial declines, corrections, and/or bear markets. Tradable low risk bottoms require evidence of exhausted sellers followed in short order by evidence of resurging demand, as investors rush back in to the stock market to scoop up perceived bargains. Our premium/discount indicator, located in the bottom panel of the TATY indicator, and the price charts, has an enviable record of identifying levels at which sellers have exhausted their propensity to sell. Once this has occurred the risks to further decline drops precipitously, as those wishing to sell have already done so leaving few, if any, sellers to drive the price any lower. This is the level at which SAMMY earns its stripes by objectively providing evidence that buyers are re-entering the market in size, which registers with SAMMY as resurging demand.

Once the resurging demand process is underway, the price has very likely reached a turning point. And, while the newly formed price bottom may be “tested” at some point, the objective evidence of exhausted sellers followed by evidence of resurging demand sharply increases the odds that the decline, correction and/or bear market has ended, and a tradable low risk bottom has arrived. Obviously these low risk tradable bottoms are relatively rare wealth building events (a few times a year perhaps), and are ideal price levels for cash to be put to work in equities with relatively low risks.

SAMMY is a supply and demand tool for confirming low risk bottoms, but otherwise is of little value. SAMMY is currently in rally mode with the price, so it is shown in this update for information only. However, upon the arrival of evidence of exhausted sellers during the next substantial decline, SAMMY will become an essential tool for identifying the next low risk tradable bottom. Given the positive seasonal, and the current favorable balance of demand over supply, SAMMY may not be needed for a while?


Most clients are adequately invested in equities for a stock market crawling higher, and touching new all-time highs along the way, even after taking some profits recently. However, if the stock market serves up a low risk entry to put new, or excess, cash to work, then we will act on the signal, as long as the strategic big picture continues to favor demand over supply. We shall lean toward being invested until the arrival of the next “Big Chill Warning” at which time Alexander and I will be compelled to act to protect accumulated profits, and/or client wealth, should the weight of the evidence begin to shift in favor of supply over demand. Until evidence that supply is overtaking demand arrives, then we will stay invested in equities, and collect dividends for clients along the way.


DISCLAIMER: Optimist Capital LLC, does not guarantee the accuracy and completeness of this report, nor is any liability assumed for any loss that may result from reliance by any person upon such information. The information and opinions contained herein are subject to change without notice and are for general information only. The data used for this report is from sources deemed to be reliable, but is not guaranteed for accuracy. Past performance is not a guide or guarantee of future performance. Optimist Capital LLC, and any third-party data providers, shall not have any liability for any loss sustained by anyone who relied on this publication’s contents, which is provided “as is.” Optimist Capital LLC disclaim any and all express or implied warranties, including, but not limited to, any warranties of merchantability, suitability or fitness for a particular purpose or use. Our data and opinions may not be updated as views or information change. Using any graph, chart, formula or other device to assist in deciding which securities to trade or when to trade them presents many difficulties and their effectiveness has significant limitations, including that prior patterns may not repeat themselves continuously or on any particular occasion. In addition, market participants using such devices can impact the market in a way that changes the effectiveness of such device. The information contained in this report may not be published, broadcast, re-written, or otherwise distributed without prior written consent from Optimist Capital LLC.

ByOptimist Capital

Optimist Capital Institutional Wealth Management for All

    You must be logged in to post a comment