These weekly updates have been consistently urging clients to disregard the constant stream of bad news in the financial media, and concentrate only upon what the market itself is telling us about the strength, or weakness, in the balance of supply and demand for stocks. Objective measurements of the balance have continued to show that demand for stocks remains in the superior position to supply. The implication of demand being in the superior position is that the aging bull trend remains viable, and the probability of new all-time highs being touched remains favorable. On Thursday and Friday of this past week new all-time highs were touched by a number of the popular stock indexes, including the S&P-500. Investors also likely earned a quarterly dividend on their holdings this past week as VOO and QQQ often go ex-dividend around June 15 to June 21. I should have confirmation of the exact ex-div date before we leave for France.
TATY — A STRATEGIC FAMILY OF SUPPLY AND DEMAND INDICATORS
TATY, shown above in the first attachment in yellow with the S&P-500 overlaid in red and blue weekly candle chart format, recently made a bottom in the red zone, which is indicative of strength in the balance of demand over supply. TATY has a long history of remaining above, or painting out bottoms in the red zone surrounding the 140 level, during bull trends. Excursions of this indicator into the caution zone surrounding the 115-125 level are often the initial sign that demand may be becoming vulnerable to increasing supply. So for the time being the odds of the stock market making additional attempts to touch new all-time highs remain favorable. However, astute investors will notice that while TATY did manage to remain above the red zone this past week, it also painted out a concerning negative divergence with its recent strength, as the price touched new highs. This may be a one off, but should this negative divergence persist, or grow worse, then I may elect to cash out our recent long tactical trade of VOO, or a portion thereof. Core long holdings of our VOO and QQQ will remain in place, unless TATY takes the first step toward a “Big Chill” warning by taking an excursion into the caution zone surrounding the 115-125 level. Such an event would then compel us to take perhaps a more defensive posture toward protecting our accumulated gains.
SAMMY — A TACTICAL FAMILY OF SUPPLY AND DEMAND INDICATORS
SAMMY is shown above in the second attachment alone, and in the third with the SPXL ETF overlaid. Please note that the 3X leveraged SPXL is not traded in client accounts, but is traded in some selected family accounts.
SAMMY issued two buy signals during the recent market volatility, and both are now successful. Tactical trades exist to enhance performance, and some of these may turn into long term capital gains holdings, when coordinated with TATY signals. For the time being we will treat the purchases made after the first SAMMY signal as an intermediate trade subject to daily management. Unfortunately, the second signal did not result in a purchase, as I elected to use it to make an additional purchase on our own terms, and only at an extreme discount to value, but our purchase target price was not touched.
I generally try to make at least two purchases, or more, to dollar cost average into really advantageous prices, but alas the downside is sometimes my targets below the market may miss being executed by pennies, but over time this is the way to buy into a bull trend with the least risks, and why clients need pros like Alexander and I to manage their market risks. Individual investors, regardless of their sophistication and skills, simply cannot do what we do routinely to manage market risks. Even most pros do not have the kinds of tools necessary to employ our strategies and tactics, and even if they did most would lack the courage to pull the trigger, when the golden discounts to value are being offered. Superior market tools proven in the crucible of the market are necessary, but not sufficient for successful trading without the requisite courage to employ them. I’m talking the level of training and courage taught by my Marine Lt. Colonel son-in-law, and his non-commissioned officers, to young Marines bound for hot war zones. The markets Alexander and I operate in are no less an investment war zone requiring proven risk management tools, and most importantly the courage to properly apply them during the chaos attendant with fleeting discounts to value. For example, during the last two SAMMY signals issued when tariffs, inverted yield curves, impeachment, and war with Iran dominated the news of the day.
THE BOTTOM LINE
The longstanding favorable balance of demand over supply has now yielded new all-time highs in the stock market. Our core positions in VOO and QQQ continue to reward clients with both capital gains and dividends. We will continue to employ tactical trades to enhance performance, when buy signals are generated by the SAMMY family of tactical indicators. All our trades, both strategic and tactical, will continue to be managed daily during my vacation in France. For the time being, we will allow our trades to move higher with the rising tide of the aging bull trend, which I suspect may develop as a struggle as opposed to a sprint?
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.