Financial astrology: Market positions now sport more risk [Video]

1. MAY MARKETS

2. UP STARS/DOWN STARS

3. GOLDEN OPPORTUNITIES

4. QUOTES

5. ON THE WEB

6. LETTERS

 

1.  SHOULD YOU BE SELLING STOCKS THIS MAY? Yes & then again No!

KEY WATCH: Oil > $30 [$35-38] should give a positive short term signal for investors to buy & hold stocks in general.

Markets WILL be lower in/by August but can be higher (or not) next 30-45 days. ~ 3000 SPX is a year-end target for some analysts (GS says 2400 first) so we are watching but keeping to our original plan was to begin to protect end of May. 

Intermediate term, the upside above SPX 3000 is limited for now without a Covid-19 “miracle” or a short squeeze.

Market positions now sport more risk, especially above SPX 3000. Unlike last year, I believe it I still too early to sell but rather better to begin towards the end of May to protect.

Most consumers and businesses are in cash preservation mode: Notable  exceptions are Vulture aka Hedge & VC Funds.

However current earnings are likely to less influence markets than forward guidance and especially COVID-19 numbers.

Going forward there is currently a better than 75% chance of a H1 2020 bottom in place.

Markets easily over or under shoot fundamentals. However, we are getting closer in time and price when it will again be prudent to begin to protect & reduce portfolios.

Good stock picking should GREATLY outperform index investing in 2020. Money Management & Know whether investing or trading & be patient.

However by late May, our 2020 market forecast plan was to begin to protect and/or reduce Market exposure again.

For a number of reasons, (including the FOMC & Trump’s Horoscope) we saw markets first stabilize in April & project a U economic recovery. 

Now we are looking to start to protect and reduce later in May, we see markets  NOT V, L or U but W & with NO FOMO or RUSH to buy.

SOME KNOWN UNKNOWNS:

• US Politics (August - & November ?)

• Oil (+ May & June)

• Covid Vaccine/treatment/testing & Reopening Progress + (May & June)

• Debt Defaults - (ongoing)

• US GDP Negative - (Negative Q2 2020) & High Unemployment –

• Large short positions a contrarian + signal?

• Stock Buybacks & Dividends reduced or dropped -

• China Risk elevated

• Assorted geopolitical hotspots (black & white swan events) -

The Good News this = Opportunity

 

OUR VIEWS:

• There continues to be a lot of risk in the market.

• The markets were overly pessimistic if you are a long term investor. Just as the markets > SP 3200 were highly excessive, so was it < 2400 or DJIA 21500.

• There is NO rush to buy, but smart to slowly & selectively invest. 

• HOWEVER SOON IT WILL BE TIME AGAIN TO PROTECT/EXIT especially since many analysts have a ~ 3000 SPX yearend target and we more or less saw that level recently and are likely to again shortly.

• POST SUMMER INVESTMENTS WILL BE TARGETED FOR A POST COVID-19 WORLD.

 

TRADERS SHOULD DAY TRADE OR HAVE VERY DEEP POCKETS;

• Current high volatility making directional bets dangerous.

• After hard rallies or market drops, it is smart to book profits.

 

INVESTORS REQUIRE A LONGER TERM HORIZON THAN NORMAL.

Accumulate stocks from companies that are winners from this crisis, or those that can recover quickly and/or are highly discounted.

Initially we advised to distinguish between companies that Benefit from current crisis: BioTechs, Home Delivery, Cleaning Services, Streaming Video services Online Education, etc. & those that have a long hard road ahead such as restaurants, cruise lines, airlines and hotels.

Additionally conservative investors may prefer to buy stocks less effected either way such as Water Utilities or high quality corporate bonds and hence generally offer less downside risk.

Note low oil prices are a positive for consumer and many companies, but it will be a difficult year for the energy sector. Still, Oil companies may do well short term over the next 30-45 days. 

AT THE RIGHT PRICE, AND RIGHT TIME FRAME THE COVID CRISIS REPRESENTS DANGER & OPPORTUNITY.

 

Commodity Trading Buys:

GOLD ~1555 OB (+ Astro is Fall, ++ Astro Nov/Dec) First buy 14.88  Second Buy 14.80 Sold 16.50 & 1580 Rebuy < 1580

Oil ~25 OB (but + Astro is April-June).  First Buy 30  Second Buy 21  Third Buy 21.22 [Fourth 12/ Sold 24]

Silver ~14.50 OB (Astro is no longer negative cf March/April) First long term Buy 11.80

Copper <2.40 but is a deep pocket H2 2020 or 2021/2022 hold)  Fully allocated otherwise potentially long term add 2.25 OB.

We suggest positional trading the same as when we recommended selling SPX 3050 to 3350:While we enter early and exit early, lots of profit none-the-less.
We intend to slowly begin to reduce/protect/sell in late May & June.

DJIA BUYS 23185, 20000  SOLD 22400  Buy 20981, 22000 SOLD 23780
SPX BUYS 2400, 2300 SOLD 2550 & 2600
NASDAQ BUY 7350, 7800 STOP 8910 oco SELL ~9350+

The Following prices remain comfortable accumulation zones for us if/when next seen (late Summer?).

Hence additional buying will largely be either day or positional trades or undervalued special situations.

• DJIA 21000-22500  

• NASDAQ 6800-7500

• SP 2400-2600

 

IMHO “Improper” Valuations

• COPPER < 2.40 

• GOLD > 1555

• Oil < 35

 

HYDE PARK SOAPBOX: five-things-investors-can-look-for-to-find-the-next-shopify

MARKERS	DJIA	SPX	NASDAQ	SILVER	GOLD	COPPER	BONDS	OIL	BITCOIN	CNY
2019 CLOSE	28508	3231	8823	17.92	1523	2.80	1.86	61.06	7229	6.96
5/15/2020	23574	2954	9117	17.08	1754	2.33	.64	29.71	9225	7.10
PIVOTS	23580	2850	8888	17.30	1728	2.30	60	27.50	10000	7.08
RESISTANCE SUPPORT	24150 22000	3000 2789	9300/9600 8800	18 16	1780 1680	2.44 2.23	? ?	34 24	10000 6000	7.18 7.03

 

KEY DATES:       May 20 June 4, 5

DJIA:                   24000 RESISTANCE?

SPX:                    2800 SUPPORT 3000 RESISTANCE

NASDAQ:            9300 or 9600 RESISTANCE?

GOLD:                 1680 SUPPORT 1800 RESISTANCE

SILVER:              18 RESISTANCE?

OIL:                     25 SUPPORT  R1 30 R2 34 R3 38

COPPER:            2.40 PIVOT

US 10 year          WATCH

CNY                    7.08 PIVOT                       

2019 CLOSE:          DJIA 28508 SPX  3231 & NASDAQ 8823  

2018 CLOSE:          DJIA 23327 SPX  2506 & NASDAQ 6635

2017 CLOSE:          DJIA 24719 SPX  2673 & NASDA 6903

2016 CLOSE:          DJIA 19762 SPX  2238 & NASDAQ 5383

AFUND Fair Value: GOLD $1555.

Reduce Risk and Focus on Capital Preservation:

THINK TRADITIONAL SWISS AND PRESERVE CAPITAL: HEDGE AND PROTECT AGAINST DOWNSIDE RISK.

 

2. Up stars/Down stars

We are looking to buy ONLY special situations now as well as accumulate undervalued quality stocks for the long term while keeping plenty of powder dry for August.

Choose your favorite stocks and patiently bid for them approaching 2020 lows if seen again [August?]. Use NO margin and always remember that it isn’t over the Fat lady sings.  

Favorite 2020 Sectors:

Entertainment,  Mining, Select Health Care (lower cost/better outcome) & Technology (Undervalued & Highly Scalable)

Stock selection is important. When possible, we prefer to recommend stocks sporting strong cash flows, sound balance sheets & growing dividends.

Active well managed portfolios can easily outperform index funds in 2020. 

 

3. Golden opportunities

“For us, silver cannot decouple from gold, but we do see it outperforming, certainly during that recovery period in the second half of this year.”

Colin Hamilton, Managing Director - Commodities Research, BMO Capital Markets

HW: That certainly seems like a smart way to bet/hedge.

There have been and will again be so many good buys in the precious metal space depending on your time frame and risk/reward desires.

Do review past WSNW for many good ideas that should be quite profitable this coming Fall/Winter.

Copper remains highly undervalued. It was a pawn of the US/China trade spat, while now Chinese coronavirus is hugely hurting sentiment. Short term is unclear but longer term this remains a “deep pockets” BIG win.

Gold: Fundamentally there is short term decrease in mine supply COUPLED with increasing investor interest. We note gold is generally under highly favorable astrological influences later in Q3 & Q4.

Longtime Gold bugs are happy that more generalist investors are beginning to join the party: In addition, major brokerage houses have $2000+  price targets.  These views now seem more achievable especially if/when inflation fears resurface!

We believe gold valuations will largely sport at or above Fair Value in this Year of the White Metal Rat (2020).

Just as it was undervalued for a long time, it CAN and is likely to be overvalued for a LONG time.

While fundamentally gold is currently overvalued, in much of the Fall & Winter, the astro is positive for gold hence we maintain a full portfolio allocation.

We advise precious metal investors to pay attention to stock selection but only selectively add before Q3 2020.

• Gold remains cheap geopolitical crisis insurance.

• For investors who cannot or will not buy the $US currency as well as investors who wish to safely and cheaply hedge their US$ exposure, ONLY GOLD IS AS GOOD AS GOLD!

•  Previously some investors were hedging record equity prices by buying gold.  They were not unhappy; currently it is no longer an active factor.

Gold FV $1555= Commodity FV: 1472 + Currency FV: 1588 + Inflation Metal FV: 1410 + Crisis FV: 1750.

INVESTORS: We plan to stay LONG in 2020 (recommending a precious metal sector buy/hold rating and occasional hedging, selling or profit taking).

We will be happy if allowed to BUY more Gold cheaper ideally < 1555 & Silver at that time (14 OB) in Q2 2020.

 

4. Quotes

"Much of the eventual improved growth and virus news is already priced into markets. Because so much future growth and uptrend potential is priced in, we expect a period of relapse and consolidation through June."

Bob Baur, chief global economist, Principal Global Investors

HW: That and oil price recovery is about it on the plus side for May/June.

“Risk-off is about to return in two waves — first bonds, then stocks. Two crashes.”

Michael Gayed, publisher, Lead-Lag Report

HW: that is one possible market scenario.

"Going forward, we're looking at how quickly jobs are going to come back to the economy. And we're not going to get a clear picture of that until we see where consumer demand is at."

Charlie Ripley, senior market strategist, Allianz Investment Management

HW: Equally important, if not more, is the ability of so called “non-essential” businesses to reopen.

 

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