A Whacky, Strange But Profitable Year

January 3, 2021

Weekly Market Outlook

By Keith Schneider


blankOne that I think we all might want to put in the “rearview mirror” although looking back we have nothing short of 20/20 vision.   After COVID 19 made itself known in early January, lockdowns in March sent investors into a quick bearish market only to be surprised just two months later as a new Bull market was launched.  Very few, if any prognosticators expected the kind of big returns we witnessed among most asset classes.

Our time tested and risk averse investment models were created to withstand even the craziest and most volatile markets, such as we saw in 2020.  A testament to our proprietary indicators and well-designed process is the performance for all of the investment models during 2020.  Looking at Alpha Rotation we left the equity markets (SPY, QQQ and IWM) in mid-January and came back in April.  Looking at ETF Complete, we participated in hot sectors (Homebuilders, Clean Energy and Transportation) long before they made others lists and the masses started investing in these areas.  And Small Cap and NASDAQ All Star strategies beat their respective benchmarks by a large amount but on a risk adjusted basis, hit the ball out of the park.  Even more impressive is a few of the proprietary blends we put together and monitor, an example of one which has a blend of all our products had produced a 40+% return for the past year thru December 30 with downside risk of only 10% of the S&P 500 during the same time.

If you do not use most or all of our investment models yet, we highly encourage you to inquire how you can subscribe and use them.  We are confident that it will help diversify your portfolio, and potentially reduce risk while increasing returns.

The highlights of this week’s market action are as follows:

  • Risk gauges are still in Risk On mode
  • The strength in Small Caps (IWM) continues to dominate
  • Volume patterns are showing divergences from price action with zero accumulation days in Grandpa Russell (IWM)
  • Three key sectors Homebuilders (XHB) Retail (XRT) and Transportation (IYT) all lagged and traded down over the past 5 trading days
  • Solar (TAN), Clean Energy (PBW) along with Industrial Metal (XME) were the top three performers over the last 6 months
  • The dollar was one of the weaker performers across all asset classes over multiple timeframes
  • Market Internals (McClellan Oscillator) have negative readings despite key indices hitting new all-time highs this week (one of the reasons our models have moved to more risk averse positioning)
  • Growth (VUG) kept its leadership over Value (VTV), so this decade plus trend continues
  • US Long Bonds (TLT) are consolidating near recent lows and a key moving just above Thursdays highs
  • Foreign equities continue to outperform US stocks
  • Silver has been strong, especially verses gold showing inflationary pressure as evidenced by the continued breakout of industrial metals (XME) referenced above
  • Soft Commodities are breaking out of a long-term downtrend adding to inflationary pressures (showing up in Corn, Wheat, Sugar etc.)

Have a Happy, Healthy and Prosperous New Year

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