Good Thursday morning all. Yesterday’s +275 point move higher in the Dow brought us to 29,500 for the first time. Post fear-mongering outbreak of the corona with lime virus US markets have now jumped by approx 5%, but the semis have rocketed 8.5% higher (semi’s lead tech, tech leads the market).
As Tyler covered in yesterday’s podcast, after this sharp move higher, our broad market indexes are hitting heavily overbought….a pause should not surprise…but should we have one, expect it to be short-lived.
This morning…and I’m sure you’ve already seen this because its EVERYWHERE…based on Chinese media reports there were 15,000 new cases of the virus in the last 24 hours (so now everyone trusts China’s reporting…got it). But here’s what they’re conveniently forgetting to tell you; 82% of all cases require little to no medical care. Oops.
Keep an eye out for companies that blame their poor results on the China flu. They are to be shorted rather than bought. And remember, we were never making light of the health risks to people and certainly not to those that lost their lives, only pointing out that the flu is a deadly risk, year in and year out, killing 1 million globally. But we also value perspective. Our fear mongering, ad dollar driven MSM should be ashamed of themselves. They won’t. And they’ll do it again…likely in 3…2…1…
SENTIMENT SURVEY UPDATES
AAII Survey out last night. All it took was ATH after ATH for bulls to jump back to 41%, with bears down to 26%. For our newbies here I’ve voted in this survey for more than 30 years and here’s all that really matters; until we surpass 60% readings for weeks on end…frankly it’ll be 70% in my view…we won’t come close to a significant top in the markets.
Just a month ago the Fear and Greed index was sitting at 90 (extreme greed). Today? 60. Sure, that makes sense. Investor sentiment drives markets as much anything you’ll ever find. Keep buying pullbacks.
If you’re on social media it’s hard to miss the sky is falling clickbait list building permarbears. When they flip to bullish…and most will…that’s when we’ll be switching to bearish/short positions. And yes, that day will come Circa 2024.
Today I’ll be a watching Fed nominee Judy Shelton’s grilling from the senate. She’s Trump’s personal pick and she loves gold… LT fan of hard money…even a form of the gold standard. Imagine my surprise when The Economist came out with a hit piece on Shelton last night. I expect she’ll be confirmed. I also expect that her addition to the Fed will be another signal to the markets to own gold.
Deep Value in Oil
Oil is coming off of its most oversold levels since the 12/18 Christmas from hell capitulation. We find this chart highly compelling. Below is a 4-year chart of USO (Oil ETF), marking each instance where oil has reached similar extreme oversold levels to today.
In the 3 previous cases oil has been this oversold, here’s what happened immediately thereafter:
2016: Oil rose 66%
2017: Oil rose 88%
2018/2019: Oil rose 51%
Interesting, no? Add that the Jim Cramers of the world absolutely hate oil and energy stocks here and you have all of the ingredients of another monster move higher, directly ahead. Fits nicely with our Trump Economic Miracle, global economic recovery, global bull market, global reflation trade. Keep buying the energy names in the VRA Portfolio. We need this group to regain its 200 day moving averages…but this is deep deep value here and you know how much we like repeating patterns…that’s the chart above. And yes, this is a well defined chart of higher lows.
Finally, from the absolute asshole of our recent past, Lloyd Blankfein, the ex head of Goldman Sachs…that vampire squid blood sucking destroyer of worlds…had the unmitigated gaul to tweet out his disdain of Trump this week. Blankfein and Goldman led the way in destroying the US economy and MANY 10’s of millions Americans financial way of life, that resulted in the 2008 financial crisis. Folks, if karma is a real thing, Blankfein should look both ways before he crosses the street…for the rest of his miserable life.
Until next time, thanks again for reading…
Since 2014 the VRA Portfolio has net profits of more than 2300% and we have beaten the S&P 500 in 15/17 years.
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