The strategic question all investors – regardless of where you roll the dice, BTC’s, stocks, commodities, ForEx and such – is when (and how) does this puppy ‘flame-out?’
To be sure, since the Christmas Eve washout, our Aggregate Index (which averages multiple market benchmarks) as soared from 19,841 to the Wednesday close to 25,377. Since you may not have a calculator handy, that’s a 27.9 percent gain. And that is not even using other people’s money. That’s what you could have nailed if you put your 401K dough into something as stodgy and boring as the S&P 500 index.
Ah, but making ‘big imaginary money in the rearview mirror is always easy. It’s the going forward that’s tough.
As you know, our outlook is that the market will go up at least until the middle of August – and maybe even into the fall a ways. But, sometime between August 15 and May of 2020, we would expect a large decline to get underway.
And yet, here we were – looking at pushing the S&P to a close over 3,000 (not just a toe-in-the-water intraday peekaboo) – and then out comes the CPI report:
“The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.1 percent in June on a seasonally adjusted basis, the same increase as in May, the U.S. Bureau of Labor Statistics reported today. Over the last 12 months, the all items index increased 1.6 percent before seasonal adjustment.
Increases in the indexes for shelter, apparel, and used cars and trucks more than offset declines in energy indexes to result in the seasonally adjusted all items monthly increase in June. The energy index fell 2.3 percent as all of the major energy component indexes declined. The food index was unchanged as the index for food away from home rose but the index for food at home declined.
The index for all items less food and energy rose 0.3 in June, its largest monthly increase since January 2018. Along with the indexes for shelter, used cars and trucks, and apparel, the indexes for household furnishings and operations, medical care, and motor vehicle insurance were among the indexes that increased in June. The indexes for recreation, airline fares, and personal care all declined in June. “
“The all items index increased 1.6 percent for the 12 months ending June, a smaller increase than the 1.8percent rise for the period ending May. The index for all items less food and energy rose 2.1 percent over the last 12 months, and the food index increased 1.9 percent. The energy index, in contrast, declined 3.4 percent over the last 12 months.
The problem with all of this data is that even when you thin you have a clear vision of the future, you’re bound to get out too early, thus losing the final part of the rally. Or, you will get out too land. In which case, pencil out what a thousand point down day would cost if you can get out even then…
Which gets us to where the markets may go next.
For the bearish types, there’s The Week trying to explain in “Investors are fleeing stocks. So why is the market still rising?” And adding to the bearish case is there’s one of our favorite people, “Art Cashin, wearing ‘S&P 500 3,000’ hat, warns of rising recession risk.”
On the bullish side, there’s J Powell of the Fed saying that he’s open to a quick rate cut as conditions develop.
Now here’s the thing you have to keep in mind.
There are generally three kinds of investors.
One type get classified as pattern day traders. Under FINRA Rule 4210, these people keep at least $25,000 in their account at all times and they can pop in and out of stocks at their pleasure but they understand settlement rules, margin, and that sort of thing. (Saw a feller like this shaving this morning…)
Then there are “swing traders.” These people don’t like the poker table so much as the craps table, to put it in casino terms, because there are some situations in craps where it’s an even-money deal with the house and if you know the Martingale concept you can sometimes get luck. Other times you bust. A lot of day traders would rather be swing traders because it’s a little more relaxing that watch a one-minute chart of fast and slow stochastics along with short term OBV all day.
Then there are “position traders.” They look as something like our “slow money” average on the Peoplenomics side of the house and they go long when the market’s in a longer-term big up move (like the one we’ve generally been in since 2009, with a Christmas break last year and such). When the market is below the long-term average, they roll into cash, sleep like babies and way for the world to stop being so manic.
The question, therefore, is what kind of Trigger Puller are you inherently wired for? If you don’t like gunplay, you look for a hired gun who has a lot of notches on his belt.
If you like to make slow decision, a long term average may work. A little ‘faster on the draw’ and you’ve got the temperament to be a swing trader. A little more and you’re one of those caffeine-jacked, blood-shot eye types who’s got a Deringer under the table and is just waiting for the market to step the wrong way and a position will be shot…
The funny thing is there’s a simple question each investor needs to think through: How much work for how much reward? The slow money, position holding, ‘widows and orphans’ would have carded almost 30-percent since Christmas. Do that for 30-years and you’re talking real money.
A wild-eyed day trader (whoever that might be) might be up 2-percent in the last two days, but they can turn around and lose 1.5 percent or even 3-percent on market whims.
The safest thing for most people is to hire a gunslinger and worry about the important things in life. What’s on TV, who’s selling the cheapest generic of Viagra, and did I buy a lotto ticket this week?
That said, if you pack a Deringer, can’t find anything on TV worth watching, don’t need Viagra, and know enough statistics to know after one lotto ticket the odds don’t change much, then you may be dat trader material.
There’s are groups that do an excellent job helping people who want to bet big money to get bigger money and get off the track. Gamblers Anonymous, for example.
I don’t know what their views on day trading are, but it would sure be interesting to look at the psychological profile of a GA client and a day trader. One of those intriguing “ We hope to get to it before check-out time” problems on our research plans list.
For now, the Dow’s up (after CPI) another 88-points. And the S&P could kiss 3,000 again…
Are you still feeling lucky? Markets move too slowly if you’re trying to sort out a trend and too fast if you’re trying to lock in a gain. There’s a great similarity to Roulette wheels, in this regard. As all gamblers know, Roulette wheels distort time when the ball is ‘close’ to their number.
Iran Tanker Taken Down Averted
Iranian boats ‘tried to intercept British tanker’. Like the old Ahnold line, we expect: “They’ll be bach...”
Stormy Weekend Ahead
We had a nice shower last night (no, you perv, this is a weather note!). Got about 3/4″ of rain. And with the action of the tropical storm off to our East, we’ve been watching New Orleans which is in a “water vice.”
Water coming down Old Miss from flooding and water rising on the Gulf side from the lower air pressure around the storm.
Why, already Bourbon Street is Bourbon and Water. Which means this “Storm likely to churn into hurricane, looms on U.S. Gulf coast.”
That little blue (Freudian looking) squiggle in East Texas is Uretopia so looks like no watering of the garden for us this weekend.
Trends to Track
With ICE expected to target thousands of migrants this weekend. we expect to hear a huge whine from the “It’s OK to break the law choir” next week.
No, it’s not.
Also worrying the libs Trump to announce executive action on census citizenship question. They didn’t have a problem with the question on the American Household survey when their darling Obama asked it. Oh, wait, it’s a Trump bash…
France is setting up for another revolution – taxing people to death. As you may have seen they are planning an “eco tax” on jet flight departures. Easily sold to the stupid, we suppose. And now France Moves Toward Digital Tax, Stoking Fight With White House.” Penny and email, anyone, dime a social rant?
If you have a peanut allergy, be sure to catch Aimmune Statement on Institute for Clinical and Economic Review (ICER) Final Report on AR101 for Peanut Allergy.
As a former ‘edumacator’ (vocational college director) I gotta ask how much of that will be course materials on Kindle?
Headlines we don’t understand: American scientist was “100 percent” murdered in Greece, coroner says. They can do a 70% murdered in Greece now?
OK, off to top off the hydroponics and get some real work done. Moron the ‘morrow…