Going Nowhere

I update each Saturday with my view of the stock market for the next few weeks (if occupied with family or travel, rarely I am a day or two late, just check back).  The monthly “Long Term” update will be on a Wednesday soon after the 15^th of each month, and this supports investors who want to buy and hold, but want to sell to avoid the bulk of a primary bear market, and buy back in for most of the next bull market.  You can always scroll down a few weeks and find the latest “Long Term” update.

If you lose your bookmark to the blog, google “Rich Investing” and it should show up on the first page or so.  The more often you google it and hit the link, the higher it will show in your results.

Economy:

The ISM manufacturing index sank to 48.1% in November from 48.3% in October, the fourth straight sub-50 reading. Readings below 50% indicate business conditions are getting worse.  The ISM non-manufacturing index fell to 53.9% in November from 54.7%, slowing but still showing growth (the service economy is now much larger than the manufacturing economy).  Factory orders rose 0.3% in October, an OK number.  The economy produced a robust 266,000 new jobs in November and the unemployment rate returned to a 50-year low of 3.5% (about 50,000 GM workers returned to work, inflating the report, but in spite of that it is a strong report).

The manufacturing economy is weak, the service economy looks strong, and employment is good.  On balance it looks like a stable slow growth economy, a good thing.  There are a couple of cracks to watch out for if they worsen down the road.

Geo-Political:

There was a NATO Summit in London last week, and while all leaders appear committed to the alliance, there is more strife there than in the past.  As I see it, that is not good for the US.

One major bone of contention is the US withdrawal from the Iran Nuclear Deal, without consultation with our NATO allies, and without Iran violating any of the terms of the deal.  The US just dishonored its commitment, it re-imposed US sanctions on Iran, and threatened to impose secondary sanctions on any nation trading with Iran (except for humanitarian goods).  The US is able to enforce secondary sanctions because so much international commerce is conducted in US dollars, and those trades ultimately are settled in the US via a private banking system called CHIPS, or by a Federal Reserve clearing system.

The US has much of the world under control of its banking system.  It knows much of what is transpiring because it can see the flow of payments.  Europe is powerless to resist.  As long as everyone feels the US does not abuse its position of power, there is no need to do anything else.  Europe seems to think the US is abusing the power it has, and it is looking for a way to regain its financial independence, from what they perceive as an abusive overseer.  The effort started a year ago when the US withdrew from the Iran Nuclear deal.

Europe is attempting to set up its own payment clearing system, outside of the US dollar denominated system.

Nov. 29, 2019 – Six European nations say they will join a fledgling financial system to bypass U.S. sanctions against Iran, challenging U.S. President Donald Trump days before he meets leaders of some of those nations in London.

In a joint statement Friday, Belgium, Denmark, Finland, the Netherlands, Norway and Sweden said they are in the process of become shareholders of the Instrument in Support of Trade Exchanges (INSTEX). Britain, France and Germany launched INSTEX in January to enable companies to trade with Iran without using U.S. dollars or going through U.S. banks, thereby shielding such companies from U.S. sanctions.

Trump has been toughening U.S. sanctions against Iran since November 2018 as part of a campaign of “maximum pressure” on Tehran to reach a new deal to stop its perceived malign behaviors. Earlier last year, he pulled the U.S. out of a 2015 deal in which world powers eased sanctions on Iran in return for curbs on the Iranian nuclear program. Trump said that deal was not tough enough on Tehran.

The Trump administration has warned other nations not to engage in various transactions with Iran or face secondary U.S. sanctions. But the 28-member European Union has pledged to do what is necessary to uphold its nuclear deal commitments, seeing the deal as a major contributor to global nonproliferation and Mideast stability.

In their joint statement, the six European nations said: “In light of the continuous European support for the agreement and the ongoing efforts to implement the economic part of it and to facilitate legitimate trade between Europe and Iran, we are now in the process of becoming shareholders of INSTEX, subject to completion of national procedures.”

https://www.voanews.com/middle-east/voa-news-iran/more-european-nations-join-effort-bypass-us-sanctions-iran

Trump has unilaterally driven a wedge between the US and the EU, with overlap with our NATO allies.  Europe questions how good of an ally the US is, when it takes unilateral action that involves them, without any consultation with them.  The result is this action expressing their desire to be independent of unilateral US dictates.

The rest of the world is OK with the US controlling the financial payments system, as long as we live up to international commitments we have made, act consultatively with our allies, and act reasonably.  So, now we have the seeds of a rebellion.  Europe will not allow the US to control all of the payments since they do not want to be controlled by an unreliable partner who breaks its commitments without consultation with our partners.

Will this alternate payment system succeed?  I don’t know, the EU is still a fairly fractious lot.  If it succeeds as wildly as the Euro (sarcasm alert!), it will fail.  But, the member nations may find enough common interest to pull this off, and asserting their financial independence from an unreliable US partner just may do it.

What has this got to do with the stock market?  This week, absolutely nothing.  But in the long run, if we alienate Europe bad enough and they succeed in setting up an alternate payment system for themselves, the US will have given up a measure of control of international commerce, potentially for no gain.  That will ultimately weaken the US.  Allowing a healthy distrust of the US by our trading partners can inject bias into our dealings and cause former partners to choose to do business with other sources, just to weaken the US and limit the amount of control we have over their affairs.  We already see it altering the course of foreign affairs.

I defy you to write a better script for Russia to extend its influence in the world, by weakening the US in ways that are not even apparent to our US citizens.

Trust is an extremely important commodity in business and foreign affairs.  It is only earned, never given.  A small rupture of that trust can take a long time of observation in order to overcome and repair.

PS:  China and Russia are working on an alternative system also.

Oct. 29, 2019 – An alternative to the Society for Worldwide Interbank Financial Telecommunication (SWIFT) global payment system, which is being drawn up by China, Russia and India, has a fair chance to end the dominance of the US dollar in the global financial sector, Chinese analysts said Tuesday.

Russian news outlet RT reported Monday that China, Russia and India are working on an alternative to SWIFT that would connect an eye-catching 3 billion people in the three BRICS emerging economies.

Huang Qifan, a former mayor of Southwest China’s Chongqing Municipality with a reputation of being a financial expert, on Monday openly blasted SWIFT, saying that it – along with the Clearing House Interbank Payments System (CHIPS) – is being degraded into a financial tool of US long-arm jurisdiction and global hegemony.

SWIFT is an interbank, nonprofit cooperative organization that provides transaction clearance services for its member banks. SWIFT takes strictly neutral positions. However, the US has great influence on the organization, to the point that it is capable of controlling SWIFT, industry observers said.

CHIPS is an important component of SWIFT, as well as the key method for converting payments into the US dollar, processing transactions, and making electronic payment transfers and clearances. CHIPS deals with cash flows, while SWIFT is for information communication.

Huang is seen as the architect of the miracle of Southwest China’s Chongqing, the nation’s fourth provincial-level municipality, which had a record run of double-digit economic growth. He said at the Shanghai Bund Summit that SWIFT is out of date, inefficient and extremely expensive.

According to RT, Russia, India, and China aim to connect their financial messaging systems to bypass SWIFT.

http://www.globaltimes.cn/content/1168382.shtml

Technical Analysis:

The market corrected a little early in the week on bad news about the China trade negotiations, then recovered later in the week on positive news about them.  We don’t know what is really going on, so I don’t know why the govt. officials try to say anything.  It all looks premature and therefore like senseless noise at present.

Technically the market remains in good shape.  RSI at the top of the chart is in high-neutral at 63 and rising, and momentum shown by MACD at the bottom of the chart is moving sideways in neutral mode.  The price action is good, but we are still living near the top of the channel we have been in for the last half of the year, so we remain vulnerable to a correction.

Let’s talk about earnings.  That is what the stock market should trade on, earnings, or profits.  Q3 came in flat, and Q4 is projected by Factset to be flat.  In fact, calendar year 2019 has been flat all year.  Looking ahead to 2020, Q1 is projected at +5%, Q2 at +7% and all of calendar 2020 at +10%, meaning the second half of 2020 would have to come in strong indeed, like +15% for two quarters.  Will that happen?  Factset changes their estimates as the time gets closer, based on feedback from the companies themselves, so it certainly could change.  What is the thesis by which Factset projects such strong earnings growth next year?  It is not stated, but with the labor market in a strong position, the theory could be that consumers are flush with cash and willing to spend and carry the economy.  We’ll see.

Click THIS LINK to open the chart in a separate window.

What am I doing?  Not much.  I sold into strength and hold a lot of cash.  The next big move in the stock market will probably be driven by an announcement on the China trade deal.  I expect an initial pop higher, then some pullback as folks realize it is not much of a deal (I have been known to be wrong though).  It appears right now the market just wants to go up until there is a reason to correct.  In a situation like that, I will usually pick a sector or two and start buying small amounts on a daily basis (like the financials, XLF), and keep a close “trailing stop loss %” order under the position.  That gives me a little participation, without much risk.  We’re in the time of the year where we get a “Santa Claus Rally” into year end, sometimes, since at this time of year the analysts estimates for next year are usually at their highest because they have not been marked down.

If you enjoy these updates, please tell your friends and family who are interested in the stock market about this blog.

Your comments and questions are always appreciated, so feel free to comment using the “Leave a Comment” feature just under the title of the post, or send me an email, my address is on the “About” page at the top of the blog.

You can use the hyperlink below the chart of the S&P that will open a larger picture of the chart in a separate window.  The reader who suggested this wants to look at the chart side-by-side with the blog text so he can look at the chart while reading the text.  To do this in Firefox you can open a “private window” from the browser menu and have two instances of Firefox up, then size each window to about half of your monitor size.  If you bookmark the link to the chart you can look at it each day of the week to see how the market is progressing to certain milestones.  The picture in this post is a static .jpg so it does not update, but if you bookmark the link to the live chart on stockcharts and look at that daily, it does update.

Rich Comeau, Rich Investing

Another Record High Week

I update each Saturday with my view of the stock market for the next few weeks (if occupied with family or travel, rarely I am a day or two late, just check back).  The monthly “Long Term” update will be on a Wednesday soon after the 15^th of each month, and this supports investors who want to buy and hold, but want to sell to avoid the bulk of a primary bear market, and buy back in for most of the next bull market.  You can always scroll down a few weeks and find the latest “Long Term” update.

If you lose your bookmark to the blog, google “Rich Investing” and it should show up on the first page or so.  The more often you google it and hit the link, the higher it will show in your results.

Economy:

New home sales in the U.S. decreased 0.7% on a monthly basis in October to a seasonally-adjusted annual rate of 733,000, however the figure for September was revised up to 738,000 from 701,000 so new home sales still look good.  The 4-week average of new jobless claims fell by 1,500 to 219,750, still in the low range.  The second estimate of US Q3 GDP came in at 2.1%, up from the initial estimate of 1.9%.  Orders for durable goods climbed 0.6% last month, but orders for military goods accounted for .5% of the increase while the civilian economy came in about flat.  Consumer spending increased 0.3% in October, the eighth monthly increase in a row.

Housing is a bright spot for the economy due to the Fed interest rate cuts, but elsewhere the US economy looks like the same slow growth economy we had for much of the last decade.  That is not particularly bad, in fact when the government over-stimulates the economy it can create bubbles that pop and hurt, like the 2008 mortgage crisis.  There is actually a lot that can be said for slow steady sustainable growth.

Geo-Political:

I will relate what I heard in an interview with a former high ranking defense department consultant, which echo’s some of my thinking.  I have said I don’t think we’ll see another major world war like WW II, because the killing and destructive power makes it so that even if you win, the cost of victory will outweigh the objective you achieve.  Regional conflicts will continue however.

The consultant pointed out that the major US policy over the last 40 years with China, starting under Ronald Reagan in the early 1980’s, was to open trade and engagement with China and as their economy progressed, if they wanted to continue the progress we would have some leverage to bring them into the world economy and play by the post WW II US dominated set of rules.  This worked for 30 years, but China played by their own rules, stealing technology and closing much of their marketplace to US companies unless they had a Chinese partner.  Beginning 10 years ago, the impact of unfair trade practices began to significantly impact the US economy and China was growing in influence throughout Asia and the Pacific Rim.

There is now a US consensus that the 30 year experiment to bring China into the world economy playing by largely western democratic rules, has FAILED.  Now the US has a major rival, while we derive only a small benefit.  China’s expanding influence in the Pacific region threatens US influence there.  The US has decided to challenge China, and remove some of the benefits of cooperating in the western economy.  This is not clearly stated in the current trade negotiations, so each side is struggling to find out what the other sides’ true intentions are, and that is slowing the negotiations.

5G communications is a prime example, and China was hoping that Huawei would supply the chips to the US and the rest of the world and there would be one standard controlled by China.  The US has raised concerns about whether China could eavesdrop on IP based calls and email and will not allow US companies to use Huawei chips.  The US is further pushing our European partners to abandon use of Huawei chips and play in the US scheme.  This is risky for the US since we have been antagonizing our European partners by pulling out of the Paris climate accord and the Iran nuclear deal, without consulting our European partners.  What partners they say?  The US has muddied the picture.

So, we are in the middle of redefining the relationship between the US and China.  The US and Russia had a military cold war for 50 years that has ended.  Now the US has opened an economic cold war with China.  If China wants to continue to ignore western business practices, no longer can they accrue so many advantages for their economy.  China and the US have to figure out how each will fare under a new set of rules, and what set of rules gives it the greatest advantages in the long run.

The problem is easy to state, but the solution is hard to divine.  I am sure there are several 500 page analyses available on this already, on each side.

The article below does not echo these ideas, but it is a useful discussion of the “cold war” from another perspective.

https://time.com/5730849/end-american-order-what-next/

Technical Analysis:

The market closed up 1% this week, on positive comments about the progress of the China trade talks.

Technically, the market looks pretty good, but it is overbought.  But we are in a bull market and overbought bull markets can get more overbought.  RSI at the top of the chart is at 70 which is technically overbought.  Momentum shown by MACD at the bottom of the chart is moving sideways, so neutral right now.  The price action is positive, continuing to rise, but it is bumping up against the top of the rising channel, so that raises the risk of a correction, although the positive tone of the market of late, since the Fed has cut rates 3 times, would seem to limit the size of a downdraft.  Another small technical risk is that the price of the market is extended above the 50-day moving average to about the largest level in the last year, a point where the market will eventually have a correction to “revert to the mean”.

What are the risk factors for a larger drawdown?

1. Failure to reach a substantive agreement with China on trade and tariffs.
2. Earnings downgrade of the S&P 500, which is what cratered the market last fall. Factset has downgraded both Q4 (to -1.4% on earnings vs. the prior year) and Q1 2020 (from +8% to +5%), while holding up earnings for calendar 2020 to +9% (how’s that going to happen?  Second half miracle obviously).

There are risks out there, to this overbought moderately overvalued (see the monthly Long Term update) market.

Click THIS LINK to open the chart in a separate window.

What am I doing?  Not much these days.  I mentioned that I had bought a long term bond ETF called TLT a few weeks ago.  Going into a Fed expected rate cut, I thought long term rates would also come down a bit, and if we got a stock market correction, many sell stocks and buy bonds temporarily.  That worked well for a couple of weeks, I made 1.7% on the trade.  It did not look like any larger correction was at hand, so I sold the TLT this week.  I bypassed the opportunity to collect the coupon on 12/3, in order to sidestep the risk of the principle falling more than the coupon would be worth.  I could be wrong on that, time will tell, but I know I made a relatively safe 1.7% in a month.  I had a couple of stocks called today (11/29) at profits, so I continue to pare my stock holdings.  I placed some low ball buy orders to buy back the stock I sold today, if the market pulls back from these record highs.  They say, but low, sell high.  We’ll get a correction someday.

If you enjoy these updates, please tell your friends and family who are interested in the stock market about this blog.

Your comments and questions are always appreciated, so feel free to comment using the “Leave a Comment” feature just under the title of the post, or send me an email, my address is on the “About” page at the top of the blog.

You can use the hyperlink below the chart of the S&P that will open a larger picture of the chart in a separate window.  The reader who suggested this wants to look at the chart side-by-side with the blog text so he can look at the chart while reading the text.  To do this in Firefox you can open a “private window” from the browser menu and have two instances of Firefox up, then size each window to about half of your monitor size.  If you bookmark the link to the chart you can look at it each day of the week to see how the market is progressing to certain milestones.  The picture in this post is a static .jpg so it does not update, but if you bookmark the link to the live chart on stockcharts and look at that daily, it does update.

Rich Comeau, Rich Investing

Minor Pullback

I update each Saturday with my view of the stock market for the next few weeks (if occupied with family or travel, rarely I am a day or two late, just check back).  The monthly “Long Term” update will be on a Wednesday soon after the 15^th of each month, and this supports investors who want to buy and hold, but want to sell to avoid the bulk of a primary bear market, and buy back in for most of the next bull market.  You can always scroll down a few weeks and find the latest “Long Term” update.

If you lose your bookmark to the blog, google “Rich Investing” and it should show up on the first page or so.  The more often you google it and hit the link, the higher it will show in your results.

The monthly Long Term update was posted Wed., so scroll down for lots of good information on the position of the economy and stock market.

Economy:

The four-week average of new unemployment claims nationwide, meanwhile, rose by 3,500 to 221,000.  Existing home sales rose 1.9% in October, while the median price was up 6% over last year to $270,900.  The leading economic index fell 0.1% in October to mark the third straight decline.  The final consumer sentiment index in November was 96.8, above the October level of 95.5.

These economic statistics are concerning.  Most concerning is that the leading economic index (LEI) has now fallen 3 months in a row.  In general, this raises the probability of a recession beginning six months down the road.  It does not always happen, but it happens often enough to be an indicator.  Then we have unemployment claims ticking up, and +3,500 on the four week average is a significant uptick.  I use the four week average so it is less sensitive to one week blips.  Housing likes the low interest rates.

Geo-Political:

Today’s topic will be the Federal Reserve bond buying operations that recently restarted.  It will be longer than I usually like, and I admit I am not an expert on central banking, I am not even moderately well informed.  I know what I read and little more.  I go back to an old theme of mine, when bubbles pop, it hurts.  The dot com bubble burst in 2000 and it hurt, the mortgage bubble burst in 2008 and it hurt.  I see a bubble in debt, government debt in particular.  We have successfully managed our debt load for so long that some feel it cannot burst, the central bank can always bail us out because we are the United States and we have the strongest economy in the world.  That is why things have worked for us, but everything has a limit.  Some medicines can heal you, but if you take too much they can kill you.  The US debt load and huge deficits will test that limit.

If the US government issues huge amounts of debt per year, who will buy it?  Is there enough free cash in the world to finance a trillion dollars of new US debt per year?  Japan and Europe have negative interest rates so their people buy US bonds to get some return.  But what happens if we suck all the cash out of Europe?  Who will finance the US debt?  Apparently, the answer is the Federal Reserve, the US central bank.

At least one other market analyst is thinking along the same line, Ms. Lyn Alden.  I found her website searching for information, and it is intriguing.  She states:

To back up a bit for those that haven’t followed this chain of events, the U.S. government has been reliant for decades on foreign central banks and other foreign institutions buying our growing government debt. It used to be Europe and Japan buying most of it, and then with the rise of China in the early 2000’s, China became the biggest buyer.

But in late 2014, foreigners mostly stopped buying U.S. treasuries for the first time in several decades. So, for the past five years, U.S. institutions such as banks, pension funds, and corporations had to absorb over $3 trillion in new U.S. debt without foreign buyers helping to take some of the load, at the same time that U.S. deficits were expanding due to tax cuts that were not offset by decreases in spending.

My base case that I started writing about last year was that the Federal Reserve would begin monetizing debt during the next U.S. recession, which is why I started entering large long positions in gold, silver, and their associated mining and royalty companies in autumn 2018 for a portion of my portfolios. Those positions have since performed very well.

Two months ago in mid-September, domestic balance sheets seemingly ran out of space to absorb more and more government treasury bills. So, the U.S. Federal Reserve had to step in and start borrowing those treasuries from large banks in exchange for cash, which had run their cash levels down to regulatory lower limits in order to buy treasuries. As primary dealers, it’s the job of large banks to buy treasuries and make a market for them.

This is all summarized in my October 2 article, The Most Crowded Trade and in my shorter September 21 chart piece, Repo Spike Causes.

During that research process, I wrote on September 19th that the Federal Reserve would start permanently buying treasuries, and then elaborated with more detail over the next two weeks in a variety of articles and comments. For two examples:

This time, balance sheet expansion will be for a different reason, and they’ll need it whether or not there is severe economic deterioration (that would just accelerate their need for it). It’s a more specific problem. Domestic balance sheets, and particularly primary dealers, are tapped out and can’t hold the incoming deluge of more USTs at this point. This problem has been building for a year (and further back, about five years). The recent Treasury cash-refill and corporate tax payment timing are just the straw the broke the camel’s back (like a wave on a rising waterline that was already just under the top of its container, the wave wouldn’t have hit the top if the container wasn’t already 95% full). This will be different than an optional QE for injection. This will be QE to avoid hard limit of running out of liquidity among primary dealers that literally have trouble coming up with cash for more UST.

-Lyn Alden, September 25th, Seeking Alpha

https://www.lynalden.com/november-2019-newsletter/

The media reporting on the Sept. problem in the repo funding space was benign, and so was the reporting on the Fed restarting QE at $60 billion a month for six months.  When I look at the body language and raised eyebrow looks when the TV talking heads mention it, it seems they know something they don’t want to say, like this is dangerous and the Fed is sounding like it is not.  Greenspan said he saw nothing wrong with the expansion of exotic mortgage products in 2004-2006, and they brought down the banking system.  You have to be suspicious of what the Fed says, they probably do not want to spook the people.  And they lie at times.

The root of the problem is NOT the Fed, the root of the problem is the trillion dollar deficit the government has created by cutting taxes and increasing spending.

The importance of this topic to your investing is simply this, IS THERE ANOTHER FINANCIAL CRISIS LOOMING, AND IF SO WHAT SHOULD I DO ABOUT IT?

This is a scary ugly topic, one that most of us would rather avoid.  Yet, if it is true, we must deal with it.  We can deal with it well, or we can deal with it poorly, but we have to deal with it.

Can the US government pile up debt at phenomenal rates is generally good economic times, without end in sight, while the US economy perks along in good shape forever?  For me, the answer is NO.  I don’t know when it will hit, but I suspect we will take a hit.  My best guess is the next recession things will get very uncomfortable.  Do you have a Plan A (times are good), and do you have a Plan B (times are bad)?

Technical Analysis:

The stock market lost about .5% last week on conflicting statements about progress on the China trade talks.  Time is short to get anything signed by the end of the year, but we’ll see.

Technically the market is in fair shape.  RSI at the top of the chart is near overbought, having pulled back a bit to 68.  Momentum shown by MACD at the bottom of the chart looks like it is starting to decline slightly and the histograms are below zero.  The price action last week was negative, but just slightly.

I don’t see the case for a significant rise to stock prices here.  Earnings season was flat, GDP for Q3 was back to the 2% area we saw for much of the last decade, which is fine but not great.  GDPNow for Q4 is estimating 1.6% which is lackluster.  My concern is that just a few big companies with good business are driving up the index averages, but that can go on.  You have to look at the valuation level of those companies and ask, how long can this go on?

Will the small selloff turn into something bigger?  It could, or not.  I think the market is waiting the outcome of the China trade talks and the whole thing seems to hinge on that.  Depending on what is decided, the market could go up 5% or down 5%.  That will be the short term reaction.  Then, analysts will evaluate the deal and reality will set in, what does the deal say, who won, and is this really that good for the US?  I expect a wennie of a deal, so initial exuberance may not hold.

Click THIS LINK to open the chart in a separate window.

What am I doing?  Not much.  I sold most stocks that I held during the uptrend from October.  I hold lots of cash.  I hold some TLT and it is up, I bought it for a short term trade because it had gotten oversold, I have a profit, and it will probably be sold soon.  The case to keep TLT would be if the economy slows and the Fed continues to lower rates.  The case to sell TLT would be the US signs a significant trade deal with China, tariffs get lowered and commerce flourishes, causing rates to rise and bond prices to fall.

If you enjoy these updates, please tell your friends and family who are interested in the stock market about this blog.

Your comments and questions are always appreciated, so feel free to comment using the “Leave a Comment” feature just under the title of the post, or send me an email, my address is on the “About” page at the top of the blog.

You can use the hyperlink below the chart of the S&P that will open a larger picture of the chart in a separate window.  The reader who suggested this wants to look at the chart side-by-side with the blog text so he can look at the chart while reading the text.  To do this in Firefox you can open a “private window” from the browser menu and have two instances of Firefox up, then size each window to about half of your monitor size.  If you bookmark the link to the chart you can look at it each day of the week to see how the market is progressing to certain milestones.  The picture in this post is a static .jpg so it does not update, but if you bookmark the link to the live chart on stockcharts and look at that daily, it does update.

Rich Comeau, Rich Investing

Long Term – November 2019

Once a month, on the Wednesday following the 15^th of the month, I will put up a long term view of the market.  This is provided for investors who don’t want to trade secondary swings in the market, but would like to exit the stock market relatively soon after a bear market begins, or enter the market after a new bull market begins (change in the primary trend).  In the blog, they will always have a title called “Long Term (month) (year)”, so you can use your browser “Find” function and easily find them.

Economics:

GDP – The first estimate of Q3 GDP was +1.9%.

With the China trade war, we are seeing some slowing of economic growth in China, Asia, and Europe.  So far, it is not a serious problem in the US, although clearly our economy has slowed and the ISM manufacturing sector purchasing managers index (PMI) is showing contraction.

The latest Atlanta Fed GDPNow estimate for Q4 GDP is +1.6%, anticipating continued sluggishness.

Annual GDP growth had been stable for a few years at a 2% annual rate and moved up a bit to 2.6% in 2017 and 2.9% in 2018.  2019 will not be as high as the two previous years if we continue as expected.

This GDP number supports the assertion that the bull market continues.  

Year	Quarter	GDP %
2019	Q3	1.9
2019	Q2	2.0
2019	Q1	3.1
2018	Year	2.9
2018	Q4	2.2
2018	Q3	3.4
2018	Q2	4.2
2018	Q1	2.0
2017	Year	2.6
2017	Q4	2.9
2017	Q3	3.2
2017	Q2	3.1
2017	Q1	1.2
2016	Year	2.0
2016	Q4	2.1
2016	Q3	3.5
2016	Q2	1.4
2016	Q1	.8

 

Fed interest rates –  The Fed cut the Funds rate by ¼% on 10/30, the third cut this year to the level of 1.5 – 1.75% (I call that 1.7 in the chart below).  The stock market barely reacted, perhaps because the Fed language was not dovish in terms of any future rate cuts.

The Fed has managed to “un-invert” the yield curve by cutting short term interest rates.  Longer term rates rose a bit after the August global recession scare.  The Fed has indicated they will pause the interest rate cuts and observe what happens to the economy, so a few months of stability of rates is expected.

Fed policy supports the assertion that the long term bull market continues.

Date	Fed Funds Rate	5 Year Treasury	10 Year Treasury	30 Year Treasury
Nov. 20, 2019	1.7	1.6	1.7	2.2
Oct. 16, 2019	1.9	1.6	1.8	2.2
Sept 18, 2019	1.9	1.7	1.8	2.2
Aug 21, 2019	2.2	1.5	1.6	2.0
July 17, 2019	2.4	1.9	2.1	2.6
June 19, 2019	2.4	1.8	2.0	2.5
May 15, 2019	2.4	2.2	2.4	2.8
Apr 17, 2019	2.4	2.4	2.6	3.0
Mar 20, 2019	2.4	2.4	2.6	3.0
Feb 20, 2019	2.4	2.5	2.7	3.0
Jan 16, 2019	2.4	2.6	2.7	3.1
Dec 19, 2018	2.4	2.6	2.8	3.0
Nov 21, 2018	2.1	2.9	3.1	3.3
Oct 17, 2018	2.1	3.0	3.2	3.3
Sep 19, 2018	1.9	3.0	3.1	3.3
Aug 15, 2018	1.9	2.7	2.9	3.0
Jul 18, 2018	1.9	2.8	2.9	3.0
2018 Q2	1.7	2.8	2.9	3.1
2018 Q1	1.5	2.6	2.8	3.1
2017 Q4	1.2	2.1	2.4	2.8
2017 Q3	1.1	1.8	2.3	2.9
2017 Q2	.9	1.8	2.2	2.8
2017 Q1	.7	2.0	2.5	3.1

 

Valuation:

PE on S&P 500 – The current 12 month trailing GAAP PE on the S&P 500 is 23.1, up from 21.7 last month.  I used 4 quarters of earnings with the most recent being Q3 2019 (90% of companies reported).

This metric is moderately elevated relative to my trimmed 30 year average of 19.

The stock market rose to record highs, while Q3 earnings are down marginally from the prior year, stretching valuation.

This indicator is supportive of the bull market since the valuation is not extreme.

S&P earnings – Factset on Nov. 15 stated the blended earnings decline for the S&P 500 for Q3 is -2% with 92% of companies reporting, and that will not inspire the stock market.  If that is the final earnings performance, it will be the first time since 2015 that we have 3 consecutive quarters of earnings decline versus the prior year.

In the grand scheme of things, the market is not egregiously overvalued, but I fail to see why, with flat earnings, the market keeps pushing to new all-time highs?  It could be led by large cap stalwarts like Google, Amazon and Apple, but if that is the answer, there is some danger in so narrowly led an advance.

This indicator is neutral to the bull market, but if estimated earnings for 2019 are continually marked down, volatility will return.

Age of primary move, bull or bear market – The bull market is 10.7 years old, which is a long bull market by historical standards.  In and of itself, this is meaningless.  It does provide some perspective that one should keep in mind.

Geo-Political:

Tension between Saudi Arabia (Sunni center) and Iran (Shiite center) has reached a level that bears watching, centered in the Yemen conflict (noted Dec. 2017).  The US has ratcheted up pressure on Iran, sending a carrier group to the region (May 2019).  Iran has begun attempts to disrupt oil shipments in the Persian Gulf and has begun to enrich uranium beyond the limits of the Nuclear Agreement that the US dropped out of, which is a destabilization to the region.

Robert Mueller has issued his report and no serious indictments came out after Roger Stone.  The report was made public on 4/18/2019.  This will be kept alive through the 2020 election in my opinion.  If the House decides to impeach, it will put a drag on the stock market.  A new threat to Trump’s presidency is the flap over Trump’s request that Ukraine investigate Hunter Biden’s board membership on a Ukrainian gas company, while withholding $400 million of military aid.

Trade wars are in effect with China and the EU.  This is causing serious pain to some segments of the economy, notably anyone that uses steel to make their products, and for farmers trying to sell their products to China.  Growth is slowing in both Europe and China.  This is already a small negative for the economy and if these are not fixed soon this can degrade and threaten the global economy.

Anthony Scaramucci in the Republican Party has openly called on the party to discuss replacing Trump on the ticket for 2020 (August 2019).  Trump’s poll numbers are very low, and if the republicans believe that Trump has no chance to win the presidency in 2020, they will move to replace him.  This is very preliminary and it may not go anywhere, but it bears watching.

Boris Johnson, the new British prime minister, threatens to force England out of the EU on a “hard Brexit” if necessary.  This will be temporarily disruptive to the markets until they figure out exactly what the implications of a hard Brexit really are, if it does occur (Sept. 2019).

Global geo-politics have degraded from supporting of the bull market to neutral.

Technical:

The market has been slowly rising to near daily record highs based on optimism for a Phase 1 trade deal with China, hopefully one that eliminates the new tariffs set to take effect on Dec. 15 (and that’s getting close).

Technically, the long term market condition has improved slightly this month.  RSI at the top of the chart is 66 and rising, which is positive and not overbought yet on the long term basis.  Momentum shown by MACD at the bottom of the chart is rising mildly, a positive.  The price action of positive in a three month upswing.  The long term chart looks very good.

Currently there is nothing to overturn the thesis that the long term bull market remains in effect.  The price remains in the channel this bull market has been in for the last 10 years.

The market’s technical indicators support the thesis that the long term bull market remains in force.

Conclusion:

The stock market remains in a long term bull market technically, and there is nothing in the general economy, market valuation, in Fed policy, or in the global geo-political realm to overturn that conclusion. 

Two of the long term indicators, earnings and geo-political, have been downgraded from “supportive” of the long term bull market to “neutral”.  The long term bull market continues, but it is no longer the vibrant and almost risk free market of a few years ago. 

 

Long Term Issues to Keep in Mind:

Federal Deficit:  (Negative – Noted Jan. 2018)  It will go up despite the republicans saying that if the tax cut bill is “dynamically scored” using “possible” increases in economic activity, it will hold down the deficit by increasing tax receipts.  This has not been shown to work in the past.  The US added $980 billion to the national debt in fiscal 2019 (ended 9/30/2019), a tragedy in good financial times.

The total national debt exceeds $23 Trillion (late 2019), and as interest rates rise, the component of the annual budget allocated to “interest on the debt” will increase, putting pressure on existing programs, or increasing the deficit.  If the deficit is allowed to rise too much in good economic times, the value of the dollar will fall and that is inflationary which is usually bad.  The thing saving us today is how poorly all the other nations are managing their economies.

Rich Comeau, Rich Investing

Market Melts Up

I update each Saturday with my view of the stock market for the next few weeks (if occupied with family or travel, rarely I am a day or two late, just check back).  The monthly “Long Term” update will be on a Wednesday soon after the 15^th of each month, and this supports investors who want to buy and hold, but want to sell to avoid the bulk of a primary bear market, and buy back in for most of the next bull market.  You can always scroll down a few weeks and find the latest “Long Term” update.

If you lose your bookmark to the blog, google “Rich Investing” and it should show up on the first page or so.  The more often you google it and hit the link, the higher it will show in your results.

The monthly Long Term update will be posted Wed. 11/20.

Economy:

The consumer price index jumped 0.4% in October, with energy accounting for more than half the increase, while the increase in the cost of living over the past 12 months edged up 1.8%.  The four week  average of new jobless claims rose by 1,750 to 217,000, a generally low number.  Retail sales increased 0.3% in October.

The US economy is just perking along, not too hot or too cold.

Geo-Political:

A few quick hitters:

Brexit:

31 October, 2019 – The bill to hold a general election on 12 December has now received Royal Assent which means it is law.

It follows the confirmation of a Brexit delay until 31 January 2020 after the EU agreed to the UK’s extension request.

Prime Minister Boris Johnson had previously said the UK would leave by 31 October “do or die”. He has agreed a deal with the EU but the bill implementing it has been put on hold. It will now not progress before the general election.

https://www.bbc.com/news/uk-politics-46393399

Trade Deal with China:

Nov. 15, 2019 – The Dow Jones Industrial Average surged more than 150 points to a new all-time high on Friday after White House economic advisor Larry Kudlow said the two countries were “getting close” to reaching a trade deal.

The stock market has moved on virtually every U.S.-China trade headline for nearly two years. Kudlow, in particular, has signaled encouraging progress on China trade numerous times this year, spurring investors to be optimistic only to watch the two sides take one step forward, two steps back. The trade talks have led to nothing concrete so far.

The two sides did make some progress in the bitter trade war recently. In early October, Trump said the two nations have agreed to work up a “phase one” trade deal that includes a pause in tariff escalation and more agriculture buying from China. However, China is insisting on a removal of the existing duties in place as part of the deal, which Trump said he had not approved.

https://www.cnbc.com/2019/11/15/market-listens-when-officials-repeatedly-tout-progress-on-china-trade.html

The trade talks seem to be moving the market, not earnings which is what the market should trade on.  Earnings are lackluster at best for Q3 now that most companies have reported, which I will cover in more detail in the monthly long term update on 11/20.  CNBC announcers say the algorithmic traders have their computers scour news headlines and when they see positive comments about the China trade deal, they buy stocks and push up the market.  I don’t like it, but we’ll see how it ends.

Technical Analysis:

The stock market has continued to set new highs on optimism for the China trade deal.

Technically the chart looks good like last week.  RSI at the top of the chart is overbought at 72 (70 is overbought) and is rising.  Momentum shown by MACD at the bottom of the chart is slowing, you can see it flatten out and the histograms are shrinking slowly.  The price action is positive, rising to the right, but it is getting ready to bump into the top of the channel and that will provide resistance and a good place for a correction to start (it doesn’t have to, but the odds begin to favor it).

Click THIS LINK to open the chart in a separate window.

What am I doing?  Last week I picked up a couple of utility stocks on the recent weakness (DUK).  I will watch what happens and if they weaken significantly from here, I would buy a little more.  People seem to be getting over their fear of recession and betting that a signed China trade deal will spur global growth.  I think any “phase 1” deal with China will be small and probably not have that much impact on global growth.  So I am still interested in good steady dividend payers, just not at nosebleed prices.  I had a bunch of covered call options expire Friday and had a couple of stocks called.  As they say, I never knew a man to go broke taking a profit.  Next week I’ll decide what to do with the stocks that are no longer covered by a call option.  I am not willing to allocate much money to an overbought market, so I am waiting for a better entry point.  If you think the market is going higher, you could buy a small piece of SPY and put a trailing stop loss order under it.  If the market continues to rise, you can continue to buy small pieces of SPY and protect them by updating the trailing stop loss order to protect all of the shares.  I did that a few weeks ago, but now that we are fully overbought I am not going to do it.

If you enjoy these updates, please tell your friends and family who are interested in the stock market about this blog.

Your comments and questions are always appreciated, so feel free to comment using the “Leave a Comment” feature just under the title of the post, or send me an email, my address is on the “About” page at the top of the blog.

You can use the hyperlink below the chart of the S&P that will open a larger picture of the chart in a separate window.  The reader who suggested this wants to look at the chart side-by-side with the blog text so he can look at the chart while reading the text.  To do this in Firefox you can open a “private window” from the browser menu and have two instances of Firefox up, then size each window to about half of your monitor size.  If you bookmark the link to the chart you can look at it each day of the week to see how the market is progressing to certain milestones.  The picture in this post is a static .jpg so it does not update, but if you bookmark the link to the live chart on stockcharts and look at that daily, it does update.

Rich Comeau, Rich Investing

New Record Highs Again

I update each Saturday with my view of the stock market for the next few weeks (if occupied with family or travel, rarely I am a day or two late, just check back).  The monthly “Long Term” update will be on a Wednesday soon after the 15^th of each month, and this supports investors who want to buy and hold, but want to sell to avoid the bulk of a primary bear market, and buy back in for most of the next bull market.  You can always scroll down a few weeks and find the latest “Long Term” update.

If you lose your bookmark to the blog, google “Rich Investing” and it should show up on the first page or so.  The more often you google it and hit the link, the higher it will show in your results.

Economy:

Durable goods orders for Sept. fell a revised 1.2%.  The ISM non-manufacturing index rose to 54.7% last month from a 52.6% reading in September that was the weakest in three years.  The four week average of new jobless claims rose a scant 250 to 215,250, a generally low number.  The U. of Michigan preliminary consumer sentiment survey rose slightly to 95.7 this month from 95.5 in October.

The economy remains sluggish.

Geo-Political:

The US and China trade negotiators continue to talk, but any major progress seems far away.  Trump would like a political win going into his impeachment, and the Chinese economy is hurting, so both sides have an incentive to sign a deal, even if it only symbolic.  On the other hand, if China thinks Trump is more anti-China than his possible successors if he loses the election, they could see how little Trump will demand of them in a “phase 1 deal” in order to get some win, any win, and take what they can get now without giving up anything of substance.  What they will probably not do is anything that would help Trump get re-elected, and that means they will not be willing to give up anything of substance.

From Europe, things are still sluggish:

November 8, 2019 (Reuters) – The European Central Bank is determined to maintain its present monetary policy until conditions improve, ECB governing council member Bostjan Vasle told a banking conference on Friday.

He said the ECB believes interest rates should remain low for a “longer period”, adding that ECB policy was aimed at influencing short-term and long-term interest rates.

“We are aware that the room for adopting further instruments is probably reducing and could lead to conditions when the effectiveness of instruments will be even smaller while their negative effects will be getting bigger,” Vasle said.

Consequently, euro zone states need to accompany ECB monetary policy with structural and fiscal reforms that will promote economic growth, raise productivity and address challenges of the ageing population, he said.

Global risks and uncertainties are rising, mainly because of trade disputes, uncertainties regarding Brexit and slowing economic growth in China, he said.

“The key factors that are slowing down growth and increasing uncertainty are coming from the economic policy-makers … and are not a result of internal imbalances,” Vasle said.

He urged banks to lend more to companies but warned that ample liquidity of banks could lead them into riskier investments that might threaten financial stability.

https://uk.reuters.com/article/uk-ecb-policy-vasle/ecb-will-continue-current-policy-until-conditions-improve-vasle-says-idUKKBN1XI101

Technical Analysis:

The market continued its slow climb, closing the week up .6% to an all-time closing high of 3093.

It was time to refresh the chart.

Technically, the chart looks good, but it is looking extended now.  RSI at the top of the chart has moved up to overbought at 70.  In a bull market, when it gets overbought, it can get more overbought.  The rules reverse and in a bear market when it gets oversold, it can get more oversold; clearly something we are not concerned with right now, just information for future reference.  But as I have mentioned, in the last year when the market has gotten overbought, it has not remained there very long before correction has set in.  Now, the market can do anything, it could act like a young bull and keep powering up, but I think the odds are against it with the milk toast earnings season.  Momentum shown by MACD at the bottom of the chart is rising steadily, a good sign for the short term, but it is also up at levels where it has rolled over in the past year.  The price action is clearly positive with constant upward action.

Everything looks good, but it begs the question when the next correction will happen.  We’re in territory where caution is indicated, and as I mentioned last week, I already began selling into this strength.

Click THIS LINK to open the chart in a separate window.

What am I doing?  Last week I didn’t trade.  I took a little vacation out to Marfa in west Texas and toured the Davis Mountains State Park, Fort Davis National Historic Site, McDonald Observatory, and took a couple of short hikes on the drive down south to Presidio.  We thought Marfa was the jewel of the west Texas swing and enjoyed the dining there.  The Davis Mountains Nut Company has very good pecans coated a variety of ways, and they ship.  The holidays are coming!

I sold my index ETF a couple of weeks ago, but I still have my individual stocks.  I had sold covered calls against them and they all expire in one week.  Some will be called, meaning my profit was capped by the call strike price, but I am happy to see them fetch the price I agreed to sell at.  I will keep most of the stocks and evaluate whether to sell them or sell another covered call at a higher strike price.

If you enjoy these updates, please tell your friends and family who are interested in the stock market about this blog.

Your comments and questions are always appreciated, so feel free to comment using the “Leave a Comment” feature just under the title of the post, or send me an email, my address is on the “About” page at the top of the blog.

You can use the hyperlink below the chart of the S&P that will open a larger picture of the chart in a separate window.  The reader who suggested this wants to look at the chart side-by-side with the blog text so he can look at the chart while reading the text.  To do this in Firefox you can open a “private window” from the browser menu and have two instances of Firefox up, then size each window to about half of your monitor size.  If you bookmark the link to the chart you can look at it each day of the week to see how the market is progressing to certain milestones.  The picture in this post is a static .jpg so it does not update, but if you bookmark the link to the live chart on stockcharts and look at that daily, it does update.

Rich Comeau, Rich Investing

Record High on the S&P 500

I update each Saturday with my view of the stock market for the next few weeks (if occupied with family or travel, rarely I am a day or two late, just check back).  The monthly “Long Term” update will be on a Wednesday soon after the 15^th of each month, and this supports investors who want to buy and hold, but want to sell to avoid the bulk of a primary bear market, and buy back in for most of the next bull market.  You can always scroll down a few weeks and find the latest “Long Term” update.

If you lose your bookmark to the blog, google “Rich Investing” and it should show up on the first page or so.  The more often you google it and hit the link, the higher it will show in your results.

Economy:

Gross domestic product (GDP), the official scorecard for the economy, grew at a 1.9% annual pace in the third quarter, in the first estimate.  The four week average of new jobless claims slipped by 500 to 214,750, a low number.  The U.S. created 128,000 new jobs in October, but the unemployment rate edged up to 3.6% from 3.5% (this can happen if more people enter the workforce, than get new jobs).   The ISM purchasing manufacturing index came in at 48.3% last month, which showed the sector continued to contract in October, the third straight month of slowdown amid global trade uncertainties (bad news).

We’ve seen a slowdown in GDP for the last 4 quarters, from the 3% rate in 2018 (first year of the tax cuts), to the low 2% range in 2019.  We were told that the tax cuts would raise GDP to the range of +3 – 4% economic growth, especially coupled with the deregulation the Trump administration was pushing.  The deregulation involved eliminating rules on financial institutions that were put in place after the financial crisis in 2008, and relaxing environmental protections to reduce cost for energy companies.  Two questions arise, 1) did the tax cut and deregulation produce the growth and jobs they promised, and 2) did they come with any negatives?

Question 1 – When the tax cuts were passed many economists did not believe the administration, that growth would accelerate to 4% on a long term basis.  Most felt the tax cut would only produce a short term “sugar high” in the economy for a year or two, and I thought the same thing because that is what I have observed over the last 5 decades (I’m older, but have only been an observer as an adult).  With the GDP running in the low 2% range currently, it appears the economists who were the doubters will be correct, and the administration lied to the people.  Corporations and the wealthy have been the biggest beneficiaries of the tax cuts, but when running, Trump said the tax cuts would be focused on the middle class, which did not occur.

One could say the trade war is responsible for the economy returning to the long term growth rate around 2%, and it is not a failure of the tax cuts to spur growth.  An economy is a very complex set of interactions, and while it is undeniable that the trade war has slowed growth somewhat, there is no current way to determine how much of the slowdown is attributable to the trade war and how much to the tax cuts losing their impact.  All I know for sure is that despite the tax cuts and deregulation, the economy is not on pace to deliver 3 – 4% growth for the foreseeable future.

Question 2 – So, did the tax cuts and deregulation come with any negatives?  The effects of increased pollution are difficult to assess on quality of life and I will not attempt that, but you could do some research.  The effect of the tax cuts on the deficit have been substantially negative, with the annual deficit ballooning to one trillion dollars in the fiscal year just ended Sept. 30, bringing to total national debt up to $23 trillion, a shame in good economic times.  The final Obama deficit was about $500 billion, so Trump has doubled the deficit in 3 years during good economic times.  Some republicans have said the deficit no longer matters (google “dick cheney deficits don’t matter), but like so many things that can hit a tipping point, Jeff Gundlach has said about the deficits, “they don’t matter, until they do”.  I am in the Gundlach camp on that.

Geo-Political:

The Fed met last week and cut the Fed Funds rate, as expected:

Oct. 30, 2019 – The Federal Reserve cut its benchmark interest rate for the third straight meeting and signaled it may pause before further changes to monetary policy to see whether these easing steps are enough to sustain the economic expansion.

At the policy meeting on Wednesday, officials said they would lower the federal-funds target rate by a quarter percentage point, to between 1.5% and 1.75%.

In taking this action, the Fed cited “the implications of global developments for the economic outlook as well as muted inflation pressures.” In essence, these rate cuts are insurance against a recession.

Fed Chairman Jerome Powell said policy would remain steady as long as “incoming information about the economy was broadly consistent” with the Fed’s forecast of moderate economy growth, a strong labor market and inflation near the 2% target.

“We believe monetary policy is in a good place to achieve these outcomes,” Powell said. “We see the current stance of policy as likely to remain appropriate as long as incoming information about the economy remains broadly consistent with our outlook.”

https://www.marketwatch.com/story/fed-cuts-rates-for-third-meeting-in-a-row-signals-pause-2019-10-30

Another pressure on the Fed to keep interest rates low, and nobody talks about this, is the $23 trillion dollars in debt that that government is now carrying, which is now growing at one trillion dollars per year and projected to increase each year!  The budget item “Interest on the Debt” is already huge, and if interest rates increase, as portions of that debt mature and get refinanced at higher rates, the federal deficit will grow because of the cost to carry the debt.  That is not the Fed’s responsibility, it is the responsibility of congress and the president to operate sound fiscal policy, which they are failing to do.  Nobody cares about the deficit, until a problem comes along, and we can’t spend our way out of it because the total debt is already so large.  That would be very bad for the stock market.

Technical Analysis:

The market was up 1% this week to an all-time record high of 3067.

Technically the chart looks good, but this swing in the market is very near to overbought, and this year when the market has set new highs it has not pushed much higher from there.  RSI has almost reached overbought at 68 (70 is overbought), and is in a nice rising pattern.  Momentum shown by MACD at the bottom of the chart is rising and that’s positive for the short term.  The price action is clearly positive.

The nature of a bull market is that when it gets overbought, it can get more overbought and remain overbought for weeks or months before a correction occurs.  That tends to happen earlier in bull market cycles.  This bull market is 10 years old, and recently when it has gotten overbought, that has not persisted for weeks or months.  That makes me cautious.

Click THIS LINK to open the chart in a separate window.

What am I doing?  Fortunately I did my buying in late Sept. and early Oct. and last week I did my first “sell into strength”.  I sold my SPY and kept my individual stocks, since most of them have covered call options sold against them, expiring 11/15.  Right now, it looks like my BMY will be called.

They say “buy low and sell high” and it’s not that easy to do.  You have to get into a reverse psychology from the majority of investors who get excited when everything looks good, and they tend to buy into overbought markets and suffer from the following correction.  Then they get scared in the following correction when it is a big one and they sell when the market is low.  That is the opposite of what the professionals do.  The market is high, so I have started selling into that strength, then I’ll wait for a correction and try to buy back in when the market is lower.  Nobody can pick the absolute top of the market, so when you begin selling into strength, the market will probably go a little higher.  That can be frustrating to see the stocks you just sold continue higher.  But, when the correction comes and you can buy back in at a lower price than where you sold out, it feels pretty good then.

If you enjoy these updates, please tell your friends and family who are interested in the stock market about this blog.

Your comments and questions are always appreciated, so feel free to comment using the “Leave a Comment” feature just under the title of the post, or send me an email, my address is on the “About” page at the top of the blog.

You can use the hyperlink below the chart of the S&P that will open a larger picture of the chart in a separate window.  The reader who suggested this wants to look at the chart side-by-side with the blog text so he can look at the chart while reading the text.  To do this in Firefox you can open a “private window” from the browser menu and have two instances of Firefox up, then size each window to about half of your monitor size.  If you bookmark the link to the chart you can look at it each day of the week to see how the market is progressing to certain milestones.  The picture in this post is a static .jpg so it does not update, but if you bookmark the link to the live chart on stockcharts and look at that daily, it does update.

Rich Comeau, Rich Investing