The Investment “VACCINE”

March 14, 2021

Weekly Market Outlook

By Keith Schneider


A friend DG, contributed to the beginning of this article

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“Keith, hope you and Mish are well.  We are in Florida and just wanted to tell you that part of the country is “wide open”.  Few people wear masks here and the discussion with friends, over and over, is about the “VACCINE”.  Thought I would share some insight on how these conversations go here in South Florida.

Like a badge of honor or buying a sexy stock or valuable trading cards, we have not been too many places where the first topic of discussion is “Did you get your shot yet?”  We have spoken with friends up north and they too ask us right away “Get the shot yet?” or I had to drive three counties over to a small obscure Rite Aid to get my Moderna shot.  Our mutual friend here in Ft. Lauderdale is driving to Pensacola Sunday because that is the only place he can get the “shot”.

Last night, however, during a dinner with friends from NJ, the wife said there is no way on earth I am getting the Vaccine (an anti-vaxxer who has bought into the possible harmful effects and many conspiracy theories out there, right, or wrong she does not want a potentially “harmful” substance in her body).  Most interesting though is that her children will have to get “the SHOT” in order to return to school in New Jersey.”

vac·cine

/vakˈsēn/

noun

  • a substance used to stimulate the production of antibodies and provide immunity against one or several diseases, prepared from the causative agent of a disease, its products, or a synthetic substitute, treated to act as an antigen without inducing the disease:


The SHOT:

Whether or not it eliminates the dangerous COVID virus, most Americans want a magic elixir.  The side effects and potential harm are insignificant that most Americans are willing to jump through hoops to get one of the 3 approved vaccines.  It is the talk of the town.

I want to discuss with you how it is affecting the significant rotation in stocks, our technical indicators, and the overall effect on the economy.  As you recall during the 4th quarter of 2020, we saw a major rally, beginning in both growth and to a lesser degree value stocks.

The market loves to move positively, on the expectations of good news and a change in the economy dynamics.  This was certainly the case during the latter part of 2020 as investors began the expectation of an opening to the economy sometime in 2021.

This, they believed, would be accomplished by “the SHOT” and a potential of herd immunity, called for with some degree of betting odds to be around April as Spring arrives and people spend more time outdoors, another positive to mitigation of airborne carriers.  Then in December and January the vaccines were unleashed to the people and each State managed their distribution, albeit a bit differently.  I had a doctor friend who traveled to NY from Ohio to get “The SHOT” in January.  Certainly, front line healthcare workers rushed without skipping a beat, to get protected.

What is interesting is the stock market’s response to all of this.  After rallying to start 2021, in February the market began to look a bit “rich” and those stocks that had a banner year in 2020, began to lose steam.

By mid-February with the potential opening of society here and abroad, the dollar gained strength, interest rates vaulted higher, and we began to see a re-emergence of Value stocks.

The stay at home, high momentum growth stocks lost some of their appeal and investors were moving money quickly out of these areas of the market and to the beaten-up areas that had lied dormant waiting for the SHOT, namely financials, media companies, retail, transportation companies (i.e., airlines), and oil and energy related companies.

The Sector Rotation commenced in a swift and powerful way.  Where growth stock indices had kept a 10-20% advantage during most of 2020, the opposite has taken hold and now Value is above Growth by an astounding 10% or greater.   Historically, I believe this is the fastest that this has occurred.  Money flows faster and faster due to the news cycle, more people having brokerage accounts, faster electronic trading, and significantly more engaged participants.  The move from sexy stay at home / technology stocks to older less sexy industries has been mined spinning.

OUR VACCINE

Not to be too redundant, but we established MarketGauge to offer investors significantly better tools (BIG VIEW), well-constructed models based on our propriety indicators and discretionary services that offer much better RISK ADJUSTED performance than the majority of buy and hold strategies.  Our overriding thesis has (and will continue to be) that we have The SHOT….

While we have no investment tools to create antibodies or protect you from some unforeseen virus. However, in the investment world risk and loss of capital can be as harmful to your investment portfolio as any kind of virus to your basic health.  Therefore, utilizing our cadre of propriety market tools and indicators that can and will keep you on the right side of the market.  The intended results are less risk and better returns.

Therefore, our “Vaccine”  is designed to help you, the investor, not get hurt should we go into a tailspin in the markets.  Moreover, our cocktail (“SHOT”) would incorporate different investment themes so that we could deliver ALPHA (excess return) in any type of market environment.  However, it is abundantly clear that you need access to all the tools in the toolbox.  We have more than 10 investment model combinations and more coming.

Some of our very best customers and partners started off with one investment strategy, like Alpha Rotation and then discovered the NASDAQ and Small-Midcap All Stars, Complete ETF and then Mish’s Premium Trader and are now using all the tools in the toolbox.  You may feel the angst occasionally that we are in cash because of our Risk VACCINE but may not be aware that our Complete ETF model is up over 26% year to date with a profitable week while some of our other models were sitting dormant in cash.  We encourage you to use a few or all the Market Gauge models to benefit the overall risk and performance of your portfolios.  The added diversification is constructive and will add to your success.  And our loyal long-term customers know that we work hard and put much effort in everyday because we want YOU the investor to be successful, happy and most of all profitable.  We know it can change your lifestyle, help you maintain your standard of living and have an “edge” on other investors who don’t have the “Investment Vaccine”.

Work has progressed on a few new models that will encompass different areas of the market that we do not yet have exposure to.  Additionally, we have been working on tools to optimize the use of our many models and strategies.  And we are partnering with a major technology and financial services entity to be able to deliver ready-made portfolios and trading technology to make it easier to incorporate investment blends and trading disciplines.  It is exciting around here to say the least.  However, we will also incorporate the “Investment Vaccine” to mitigate risk and increase returns.  We are so happy you are along for the ride.

Here are this week’s latest highlights:

  • Risk Gauges are still in bullish mode but bit as robust as they have been with several key intermarket relationships weakening despite the rally
  • US equity benchmarks roared led by Grandpa Russell (IWM) which was up +7.35% on the week and +18.93 YTD while NASDQ 100 (QQQ) struggles to stay positive up+.55% for the year.
  • The QQQ’s closed under its 50 DMA, while the other key US Equity benchmarks are still in strong bull mode
  • Volume patterns across all four US equity benchmarks are showing moderate distribution
  • Long Bonds (TLT) made new lows as quickly rising interest rates overhang the markets
  • The Modern family continues to highlight a major shift is underway with new leadership shifting to the Financial Sector (KRE) and Transports (IYT) and Retail (XRT)while Semi’s (SMH) and Biotech (IBB) stayed weak
  • Big Cap Value stocks that permeate the Dow Industrial are awakening from a deep slumber and it is TSI (Trend Strength Indicator) is now in second position verses the four US equity benchmarks
  • Market Internals / McClellan Oscillator and Volume patterns reversed a sell signal and back into bull mode
  • Gold (GLD and GDX)) and Gold miners might have found some support however players not sure if the stimulus package will ignite inflation and overpower the negative forces which are rise in rates and the dollar
  • Soft commodities (DBA) and Energy (USO) continue to perform well with the prospect of the economy reopening

 

Have a great weekend and best wishes for your trading.

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