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

1. You got to know when to hold 'em, know when to fold 'em, Know when to walk away and know when to run.

July 26+ is coming; until then, investors are living dangerously on the precipice.

We don’t think good earnings will be “good” enough?

While central bankers may allow 5% inflation, we don’t think 7%+

Hence, we maintain defensive protection:

High cash levels cash, low or no margin, writing calls, hedging, very short term trading and buying only special situations through August.

Sell by August Correction odds by August 77% Bear Market by August 62% 

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There is far 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.

While markets might rally with good earnings in thin summer markets for another week. We are not buying today’s pyramid games will continue forever.  Some possible triggers include:

• Bitcoin collapses (30K support broken which it will sooner or later) would do it.
• Another landmine would be TNX >1.50-1.75 .
• 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 tapering or warning of future course shift or just losing credibility!

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

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 34800      30606          31500           27480          

SPX 4384       3756             3944             3369            

NAS 14678    12888          13494           11160

ACT

Inflation is now above 5% and I don’t believe it is just “temporary”; if the global economy does slow, we are then likely to see STAGFLATION!.

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 [>20] 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.
• Odds of a market drop by August is HIGH- Be prepared.

Commodity Trading:

Gold             Buy on dips Rinse and repeat Last buy 1780 Sold 1830 Rebought 1812

Silver            Accumulate on dips < 26-25

Copper         Watch 4.10 Support & 4.50 Resistance

Oil                 Sell/Distribute/Short until <70

2. August 18 AFUND Stock & Commodity Webinar:

General Advice:

• Review your Portfolio Holdings for possible changes.
• Prepare a list of GOOD stocks to buy AFTER a 15-20% correction. Choose your favorite stocks and patiently bid for them.  
• Stock selection is important. Include some stocks sporting strong cash flows, sound balance sheets & growing dividends.
• Include some investments that can benefit from higher inflation such as gold, TIPS, utilities, Art/Blue Chip collectibles and selective real estate etc.

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, & Distressed Investing for Q3 2021.

Note: With Oil above $70 we continue to recommend reducing/covering Energy bets.

3. Soon gold will be entering its favorable seasonal cycle.

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

Gold Fair Value is $1833 with $1775 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 $US currency as well as investors who wish to safely and cheaply h [email protected] their US$ exposure, ONLY GOLD IS AS GOOD AS GOLD!
• Once again, some investors 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 $1833 = Commodity FV: 1670 + Currency FV: 1804+ Inflation Metal FV: 1808 + Crisis FV: 2050

INVESTORS: We will stay LONG in H2 2021 both as an investment and as a portfolio hedge.

4. JULY SEASONED SPECULATOR pick: TBA

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. " So I think that can be a really good way of playing this going forward, where you want to look at companies that are going to benefit from either interest rates rising or who have just some pricing power here, that they are able to raise their costs effectively for their consumers and continue to make that money going forward.

Courtney Dominguez, senior wealth advisor, Payne Capital Management

HW: I agree.

"There are pockets of what look like appreciable over-valuation and pockets of significant undervaluation in the US market, in my opinion. We can find plenty of names to fill our portfolios and so remain fully invested." 

Bill Miller, chief investment officer, Miller Value Partners

HW: Some Yes, “Plenty of Names” No -. Your view of the overall health of the US economy and the wisdom of the FED probably differs from mine.

“Some of what’s been reflected in the bond market is starting to filter into the (stock) market just a little bit.”

Stephanie Roth, senior markets economist, J.P. Morgan Private Bank

HW: Just wait- there is more to come.