Financial astrology: Good stock picking can greatly outperform index investing in Q2 2020

1. APRIL MARKETS  

2. UP STARS/DOWN STARS

3. GOLDEN OPPORTUNITIES

4. QUOTES

5. ON THE WEB

6. LETTERS 

 

1. APRIL MARKETS 

My-greed-oriented-algorithm-is-telling-me-to-buy-stocks

Our previous 2020 Game Plan: After having Maximum cash levels in January/February, we put 25-35% to work in March.

We are watching 2300-2400 LEVELS.

If 2350 is a base, then we can see 2550-2680 [MAY?] at which point we start to distribute stop for a potential summer problem

NOTE: WE GOT THERE ON 3/26 AND RECOMMENDED SELLING; WE PLAN TO REBUY AKA “Play it again Sam”

Note: Good stock picking can GREATLY outperform index investing in Q2 2020. Money Management & Know whether investing or trading & be patient. Follow Oil next week

For a number of reasons, we think markets can stabilize in April, but NO V recovery & NO RUSH to buy.

The FOMC has shot most of its bullets, other known unknowns:

US Politics

Oil (+ April/May)

Covid Vaccine/treatment/testing Progress in April-May

Debt Defaults - (ongoing)

US GDP Slowing - (Negative Q2 2020)

China

Assorted geopolitical hotspots (black & white swan events)

 

The Good News this = Opportunity

OUR VIEWS: The market is overly pessimistic if you are a long term investor (short or intermediate term may be a different story).  After hard rallies, it is may also be smart to book profits (when trading).

TRADERS SHOULD DAY TRADE OR HAVE VERY DEEP POCKETS;

INVESTORS MAY REQUIRE A LONGER TERM HORIZON THAN NORMAL. Either accumulate stocks from companies that are winners from this crisis, or those that will recover first or quickly and are highly discounted.

Just as the markets > SP 3200 was excessive, so is it < 2350 or DJIA 20290.

NO rush to buy, but smart to slowly & selectively invest.  We currently suggest up to 30-38% of cash utilized. (conservative vs aggressive).

There is a 38% chance the H1 2020 bottom is in, or will be in within 10 days.

Broadly speaking we have projected project an M market (W starting 2020) but NOT a V (or L).

INVESTORS: Distinguish between companies that will Benefit from current crisis: BioTechs, home delivery, Cleaning Services, Streaming Video services etc & those that have a long hard road ahead such as restaurants, cruise lines, airlines and hotels.

Also low oil prices are a positive for consumer and some companies and despite a change in sentiment expected shortly, it will still be a difficult year for most. Many share buy backs reduced or eliminated is negative just as Q2 2020 GDP

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

 

Commodity Trading buys:

GOLD ~1488 OB (+ Astro is Fall, ++ Astro Nov/Dec)  First buy 14.88  Second Buy 14.80

Oil ~30 OB (but + Astro is April/May).  First Buy 30  Second Buy 21  Third Buy 21.22

Silver ~14 OB (but Astro is negative 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 very long term 2.20 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 rebuy equity positions and begin to sell in late May.

DJIA BUYS 23185, 20000  SOLD 22400

SPX BUYS 2400, 2300 SOLD 2550 & 2600

The Following prices are comfortable accumulation zones for us, although subject to revision as it may not fully reflect government action on Covid-19 or an upcoming Oil truce.

DJIA 20000-22000 

NASDAQ 6800- 7280

SP 2300-2425

 

IMHO “Improper” Valuations

COPPER < 2.40 

BITCOIN > 1000

GOLD > 1520

Oil < 30

SILVER < 14

HYDE PARK SOAPBOX: this-stock-market-is-full-of-drunken-sailors-and-you-want-to-buy-what-theyre-foolishly-selling

KEY DATES: March 31 April 28, 29

DJIA: PIVOT 22000

SPX: 2300/2400 DUAL PIVOTS

NASDAQ: 6800 SUPPORT 7800 RESISTANCE

GOLD: 1625 PIVOT S1 1600 S2 1580 S3 1550 S4 1525

SILVER: SLOW ACCUMULATE 13.50 OB

OIL: R1 25 R2 28 R3 30

COPPER: R1 2.40 R2 2.46 R3 2.50

US 10 year: WATCH

CNY: 7.03/7.08 DUAL PIVOTS

BITCOIN: S1 6000 S2 5000 S4 4000 8000 RESISTANCE

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 $1520.

Reduce Risk and Focus on Capital Preservation:

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

We are looking to buy not only special situations now but also accumulate undervalued quality stocks for the long term while keeping plenty of powder dry for August.

Choose your favorite stocks and (near) ideal prices and patiently bid for them. 25-38% of cash employed, use NO margin but it isn’t over the Fat lady sings [August?] Obvious short (intermediate) term winners were the likes of Walmart, TDOC etc.  However I prefer the risk/reward of Oil stocks short term CHV, VLO, Gold, Silver and even Copper at the right price intermediate term.  For more conservative investment portfolios companies like ABT: fda-greenlights-first-covid-19-pointofcare-test-from-abbott.  By tracing COVID-19 news there are many with various R/R in the healthcare space.

 

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. 

There are 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.

We correctly identified a successful sell of Silver at 18.80- now closed.

Given it has negative astro in March/April, we are happy to see it  undervalued < 14 and while early, at 12 OB I was very comfortable with our first buy.

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 mixed to bearish, but longer term this remains a “deep pockets” BIG win.

Thanks to the FED, we again raised our FV of Gold from 1500 to 1525. Fundamentally there is short decrease in mine supply COUPLED with increased investor interest. We note gold is generally under highly favorable astrological influences later in Q3 & Q4.

Gold bugs are also happy now that more generalist investors are beginning to join the party: However, we still see it as somewhat expensive, albeit short term moe than “justified” due to Central Bank action and assorted potential global swan events.  In addition, several major brokerage houses have a $1800-$2000 year-end target. These views are NO LONGER TOTALLY PIE IN THE SKY!

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, 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!

NEW: Some investors were hedging record equity prices by buying gold.  They were not unhappy until recently. Currently it is no longer an active factor.

Gold FV $1520= Commodity FV: 1420 + Currency FV: 1555 + Inflation Metal FV: 1400 + Crisis FV: 1705.

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 to reBUY Gold cheaper ideally < 1520 & Silver at that time (12 OB again?) in Q2 2020.

 

2. UP STARS/DOWN STARS

 4,“Don’t try to call the bottom, but continue to nibble at very good companies with extremely good long-term prospects that will be OK.”

 

3. GOLDEN OPPORTUNITIES

Sam Hendel, president, Levin Easterly

 

4. QUOTES

 HW: Yes.

“Acknowledging that equity markets globally are now down 30-50% from their recent highs ... we see an asymmetrical return profile for equities with upside SPX 3400] [significantly higher than downside over the next year.”

Dubravko Lakos-Bujas, chief U.S. equity strategist, JPMorgan

HW: Bottom line: in general a favorable R/R for long term investors.

“While prices could fall even further over the next few days and weeks, 12 months from now, no one will regret buying stocks at the lowest levels since 2016.”

Jani Ziedins,  investor, Cracked Market

HW: Yes if greedy I suppose so.

 

5. ON THE WEB

Us-high-yield-default-rate-to-surge-to-10-by-end-of-year

SP500-could-find-support-around-2300-market-technicians

You-can-be-practically-stealing-quality-stocks-now-according-to-jefferies

 

6. LETTERS 

READER: How come 'last planned' Alert? What do you know (or not know) that I don't know?

HW: Because I don’t think necessary.

Weekly advice will be enough as more people realize the world is not ending (at least before late May-August )

READER: So do you still recommend 25/30% be invested at these levels

HW: There is both good and bad news out there. 

Depends on your time frame. Markets may go down next day [3/27] &/or Monday.

But later up again into May then down again summer…

Yes can be higher 35% or more for the right stocks if a long term investor.