Wall Street Next Week: Financial astrology for the successful investor & trade

1. Danger: Red Alert next week

• Upcoming we can expect a likely pivot from excessive monetary stimulation to less stimulation and
• More rising inflation and inflationary expectations.

Trading Markers: TNX 1.44 VIX 15.55 DJ 34600 SP 4244 NAS 14031 Gold 1780 & 1834

 

KEY DATES: June 22 24 25-28

Sell in June?  Sell in August?

Correction odds in June 72% by August 84%

Bear Market in June 50% by August 67% 

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There is still too little REALITY to today's markets BUT don’t be surprised when inflation watchers stop believing the “temporary” fairytale story, a swan event &/or Robinhooders learn trees don't' grow to the sky. We are not betting today’s pyramid games will continue- see above.

The trigger?

• Bitcoin collapses (30K support broken which it will sooner or later) would do it. Cf: mark-cuban-backed-crypto-token-plummets-to-zero-within-24-hours
• Another landmine would be TNX à 2 = 20% Nasdaq correction.
• In addition to “I” word inflation well above 2%, the dreaded “T” word- not the Trillion Dollar infrastructure package but TAXES!!!
• A change in perspective- comparing not to last month or last year, but a longer term horizon leaves little upside to analyst projections.
• FED warning of course shift (tapering, willing to act IF inflation is NOT temporary), or perhaps even suggesting they are discussing tapering vs. just losing credibility!

 

I am unwilling to buy at today’s prices, especially SPX > 4000: Current markets sport very R/R upside near term.

Outside of day trading and special situations, we plan to sell/short and look to buy if/when markets are 10%-20% lower.   

PIVOTS         2020 Close  10%-            Nov 3          

DJI 34000      30606          31581           27480          

SPX 4200       3756             3831             3369            

NAS 14031    12888          12789           11160

Inflation is now well above 4% and I don’t believe it is just “temporary”.

Given market sky high valuations, we do not see sufficient FUNDEMENTALS (Fed accommodation, Vaccines & Stimulus Packages) to justify SP500 earnings.

Our recommendation continues to be maximum portfolio protection.  

 

TSLA, BTC, VIX, GME & TNX are our five market “canaries in the coal mine”:

When three or more canaries sing, be ready to Head for the Hills (&/or your nearest bar) .

TNX:              > 1.50-1.75

TSLA:            < 666-555

VIX:               >22-26

BTC:              < 42-30K

GME:*           <50-30

*Gamestop & stocks such as AMC [>10] or COIN [>225] are like Bitcoin, their trading has little or no relationship to reality. 

Short of a reality check that the emperor has NO clothes, newbies learning that all stocks do NOT go UP ALL the time can also time market tops (June &/or August).

 

TRADERS SHOULD DO QUICK DAY TRADES OR HAVE VERY DEEP POCKETS

• After hard rallies or market drops, it is smart to book profits.
• Current odds of a continuing market drop this coming week is better than 65% and we will continue to short any rallies.

 

Commodity Trading:

Gold             Buy on dips Rinse and repeat Latest buy 1780 & 1753 bid

Silver            Buy on dips <26

Copper         Watch 4.10 Support

Oil                 Sell/Distribute > 70

KEY DATES:        June 22 24 25-28

DJIA:                     Pivot 33500 S1 33000

SPX:                     4200 PI

NASDAQ:             14031 PIVOT S1 13800

GOLD:                  1780 PIVOT R1 1800 S2 1750 S3 1700

SILVER:                S1 25 S2 24 R1 26 R2 28

OIL:                       70 PIVOT R1 72

COPPER:              S1 4.10

US 10 Year:          1.50 PIVOT S1 1.40 

DXY:                      92 PIVOT

VIX:                       18 S1 R1 22 R2 26 R3 30

BTC:                      36K PIVOT S1 33K S2 30K S3 24K S4 10K

 

2020 CLOSE:          DJIA 30606 SPX 3756 & NASDAQ 12888

2019 CLOSE:          DJIA 28508 SPX 3231 & NASDAQ 8823  

2018 CLOSE:          DJIA 23327 SPX 2506 & NASDAQ 6635

AFUND Fair Value  GOLD $1828

Reduce Risk and Focus on Capital Preservation:

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

 

2. Prepare a list of stocks to buy AFTER a 20% correction

Over time we expect a continued shift away from investments that benefited from the pandemic and lockdowns - such as technology, health care stocks and bonds - to investments that will benefit from a slow but continuing recovery - like resources, industrials, infrastructure, tourism stocks and financials.

Many analysts recommend adding investments that can benefit from higher inflation such energy, gold, TIPS, utilities, Art/Blue Chip collectibles and real estate.

Favorite H2 2021 Sectors:

Entertainment, Mining & Technology [AFTER a 20% correction if Undervalued & Highly Scalable]

Currently we are also watching some Select Health Care (lower cost/better outcomes, Energy & Distressed Investing for Q3 2021.

Note: With Oil above $70 we are reducing/covering Energy bets.

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

Choose your favorite stocks and patiently bid for them.  

 

3. It is a rare pleasure these days to see gold and silver UNDERVALUED!

One can only imagine Bitcoin meet reality, how it would likely to usher in a rapid source of many new gold investors.

Gold Fair Value is $1828 with $1750 support and $1925 overhead resistance.

Silver Fair Value $27 $25 support and $30 overhead resistance.

There are many good buys in the precious metal space depending on your time frame & risk/reward desires.

Gold: Fundamentally the global political and economic situation is very favorable for precious metals.

Precious metals remain favorite sections. Many generalist investors now have some interest in Metals and Mining.

Also, it is under allocated by most investment programs, this gives it even more potential room to run, especially as inflation fears resurface &/or if US dollar weakens!

Hence, we recommend a full and over weighted precious metals portfolio allocation.

However, we advise long term precious metal investors to also pay attention to stock selection.

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!

Once again, someinvestors are hedging record equity prices by buying gold.

Low real interest rates is positive for gold as well as low global bond yields makes gold an attractive alternative risk mitigation hedge.

We expect precious metal stocks to outperform physical gold & silver in 2021.

 

Gold FV $1828 = Commodity FV: 1670 + Currency FV: 1800+ Inflation Metal FV: 1800 + Crisis FV: 2042

INVESTORS: We will stay LONG in H2 2021 both as an investment and as a portfolio hedge despite short term seasonal summer trends.

 

4. June Seasoned Speculator Pick: None

Most are high risk/high reward market picks that we believe are potentially very rewarding and/or interesting to watch.

Many picks are best for speculative portfolio allocation and as such bought as a member of a group of 5 to 10 such stocks.

Remember NOT to ignore potential High Risk - meaning use speculative allocation i.e., “money you can afford to lose without altering your lifestyle.”

Always do due diligence before deciding to act. 

 

5. “The fear held by some investors is that if the Fed tightens policy sooner than expected to help cool inflationary pressures, this could weigh on future economic growth.”

Keith Lerner, chief market strategist, Truist Advisory Services

HW: Reality bites!

 

“The move from the pandemic panic lows has never been broken until today, and this is what I’m really watching and what I think could trigger as much as a 10% correction.”

Gareth Soloway, chief market strategist, InTheMoneyStocks.com

HW: Why not MORE than 10%?

 

"Fed governor Jim Bullard surprised investors when he insinuated that inflation could stick around through next year and force the Fed to raise interest rates." 

Callie Cox, senior investment strategist, Ally Invest

HW: Perhaps surprised it took so long to acknowledge.