“Elucidate: to make lucid or clear; throw light upon; explain; an explanation that elucidated his recent strange behavior.”
In yesterday’s Morning Tack I wrote:
Folks, I have been in this business for over 46 years, and observing markets with my father for 54 years, and I have never experienced anything like what is currently happening. Yes, our models “called” the post-election rally, but they have been wrong since the first week of February since they were looking for a downside window of vulnerability. Well, maybe that is not entirely true since our short-term proprietary model flipped positive last week as I wrote about in last Monday’s missive. I will tell you that in yesterday’s Dow Wow I sold 15 short-term tactical trading positions. That does not mean I have “caved” on my secular bull market theme that has been intact since March 2, 2009. Indeed, secular bull markets tend to last 14-18 years, suggesting there are years left to run in this one. Andrew Adams and I do not think it is any different this time. Yet in the short term, we do not understand what is going on. Consequently, when we do not understand the current market environment, we tend not to play…
Somehow that quip got construed to mean that I was totally out of the market, which is patently untrue. So here is the sequence of what happened. Andrew and I have played the Trump rally pretty well consistent with our models. Those same models suggested there would be the potential for a window of downside vulnerability into the last week of January or the first week of February, so we “trimmed” some investment positions near the end of January. Now for the elucidation: Wednesday’s Dow Wow (+303 points) felt awfully like an upside blow-off to me, so I looked at one of my accounts only to find there were some 15 stock positions that had not performed all that well in the November-to-March rally. The reasoning was if they had not performed well in the “straight up” rally, they should likely be sold, so I sold them. That does not mean I am totally out of the market. What it does mean is that I have raised a little more cash.
Whether yesterday was the beginning of a 5-10% pullback I really don’t know, for as stated, our short/intermediate models are currently confused, but we have never given up on the secular bull market theme that should have years left to run. Speaking to Wednesday’s Win, Jason Goepfert (SentimenTrader) wrote this: “Get me in! Traders rushed into some of the most liquid ETFs on Wednesday, triggering a spike in assets in SPY, QQQ, and IWM. For the S&P 500 fund (SPY), it was the largest inflow since 2014, and since 2015 when expressed as a percentage of total assets. When traders saw fit to rush into the fund to such a degree that it caused assets to rise 3% when it was at a 52-week high.” (Chart 2).
This morning, the preopening futures are again flat as my contacts on Capitol Hill tell me that the FBI has the names of the leakers of sensitive information at the CIA. Indeed, curiouser and curiouser…