Special Bulletin: February 5, 2020

Hail to the Chief, and to the Chiefs!

Fifty years is a long time to wait! And we’re not talking about football. According to the President, that’s how long it has been since certain economic conditions have been as good as they are now in the USA. Hail to the Chief!

As for football, 50 years is a long time to wait for a title too. In any sport for that matter! (Just ask any St.Louis Blues fan!) But Kansas City got it done! Hail to the Chiefs! 

Like the President and the Kansas City Chiefs, the market is back to its winning ways. The short-lived correction appears to be over, even though the coronavirus issue is not. Based on the action of the market this week, our Current Market Outlook has been upgraded to “Market in an Uptrend” with a “green” light.

On a side note, our research found a interesting parallel. We know the last time the Chiefs won a Superbowl, and the last time certain economic numbers were this good, were both in 1970. But did you know we had a Republican President then too (Nixon), who dealt with China in a historic way*, and later went on to win a 2nd term? Does it mean anything? Probably not. But Colts fans may be hopeful! LOL

What an interesting (and bullish) week already for investors! Let’s take stock of a few of the developments that have helped investors score gains through Wednesday. 

Over the weekend, the cases of coronavirus did not seriously worsen, and it began to appear that it was less threatening than SARS was in the early 2000’s. Stocks advanced on Monday.

The Iowa caucus became the “Iowa ruckus” and ignited the markets on Tuesday. The thought was “if the Dems can’t handle their caucus in a small state, how can they handle the White House?” Since the markets don’t like change, stocks soared due to the mess in Iowa making the President look more difficult to beat in November.

The State of the Union address last night was inspiring for investors and added additional fuel to the recovery rally today. 

Tesla soared and then soured. (And that didn’t scare the market!)

The impeachment proceedings should end today, with our increasingly more popular President receiving an acquittal.

The long-term technical condition of the stock market is still sound. The signals from our “Core 4” internal indicators have improved and are now displaying 2 green and 2 yellow lights. (See our new signal feature at the top of this post) We are back to green after just 6 trading days of a yellow condition. The “math of the market” did its job in helping us protect the assets we manage for our clients.

We recently wrote, “Waiting for a test of the 21 day moving average by the major indexes and leading stocks can lead to new insights. If that test holds, that’s seen as strength! If it fails, then one might expect a deeper selloff to the 50 day mav. (See post here.)

The S&P 500 did indeed fall to its 50 day moving average last Friday. Since then it has bolted straight up for three days. Resilient action indeed! The test appears to have been successful, gauged by the price and volume action of the major indexes and leading stocks. The odds of a price “sub-peak” followed by immediate declines on the S&P 500 are very low. Yet, a pause and small pullback for a day or two is likely. 

In a healthy sign of sector rotation, many software stocks were bludgeoned today, but the broad market rolled on anyway.

What can an investor do now? Hang onto, and possibly add to, any recent purchases made that are showing a growing profit. Maintain a “buy the dip” watch list of superior stocks that are moving forward on good volume. Watch to see if the major indexes get hit with serious distribution (professional selling) over the next three days. Expect additional all-time highs through February if the move gains strength. 

Have a Triumphant day! ®