Several of our gurus here at Money Map Press focus on using technical market data to ferret out tremendous short term trading profit opportunities in the options game. Their technical prowess, and the computing power that they put behind it, never ceases to amaze me.
I have been following Tom Gentile, Chris Johnson, Keith Fitzgerald, Shah Gilani, and DR Barton for 18 months, and I have been in awe of the strings of profit opportunities that they’ve offered their subscribers over that time.
I may not always agree with their take on the market. Let’s face it, markets are about reconciling differences of outlook. I find that I’m most in sync with Chris Johnson.
But I’ve come away with a deep respect for the discipline and skill which all of them apply to helping their subscribers.
My View Is Toward The Longer Term
My work is on a different track. As opposed to scouring the market for short term trading recommendations, my first goal is to assist you with longer term portfolio positioning. The questions I try to answer for you every week are:
- Should I be long stocks, in cash, or short
- Should I use puts or calls on the broad market to hedge my portfolio or amplify my profits
- Should I own bonds or stay in short term money market instruments
- Should I own gold, or precious metals mining stocks, or be out of that market.
This isn’t sexy stuff like finding opportunities for trades that will double or triple in a few weeks. But not all of us want to trade. Some of us have personalities that are a little more risk averse than others. Some of us are more focused on preserving and growing our capital over the longer term. The excitement of short term trading is great for other people, but not for us. We’re tortoises, not hares.
Preserving capital comes first for me. Avoiding those 40-50% portfolio losses that come along occasionally, goes a long way toward keeping your money growing over the long haul. I’m not one who believes that you must be nearly fully invested all the time. I’m always on the alert for periods of great danger, such as the past 18 months. Those are times when the risk of being in the market are simply too great to be fully invested or invested at all.
Despite the Fed’s recent change of heart, it is NOT clear that that period of danger is behind us. In September 2017 the Fed announced its balance sheet shrinkage program called “normalization,” that meant that the Fed was tightening monetary conditions. The Fed’s intent was to do that until its balance sheet reached a “normal” position in terms of the amount of reserves, or deposits of its member banks, at the Fed.
Today, How Do We Not Fight the Fed?
That made it easy to follow Rule Number One: Don’t fight the Fed. The Fed was tight. We should avoid risk and be out of stocks and bonds to the greatest extent possible.
Now things have changed. The Fed says, “Oops, we may not normalize the balance sheet. We may if the economy and the markets stay on track. Or we may not, if the economy weakens or stocks fall sharply.”
Stocks started falling sharply in the fourth quarter of 2018. That spooked them. The “normalization” program, that I viewed as akin to medieval bloodletting, suddenly became an albatross that they could no longer bear.
So now, what was once on “autopilot” (their term), is subject to adjustment. They’re talking about slowing the rate of the cuts, or stopping them altogether. They intimated that a return to outright QE would only happen in the event of something really bad happening to the market or the economy. The necessary condition for that not specified.
As a result of these changes, it becomes all but impossible to follow the dictum, “Don’t fight the Fed!” How can we not fight them if not even they admit to knowing what their next move will be?
Will the Fed ease monetary conditions enough to promote a bullish market trend? Possible, but not likely under current conditions.
Will the Fed maintain the current path of “normalization” withdrawing $50 billion per month from the system? Given the economic and market behavior lately, this looks likely for at least a few more months. But again, the Fed has gone from being a resolute and stern market disciplinarian, to acting like a nervous teenager.
Will the Fed reduce the bloodletting rate from $50 billion per month? This is a tossup. They really need no reason to make such a move other than to show the market that it can and it will.
But will it make a difference? No. As I’ve pointed out so often, the problem of the market needing to absorb massive amounts of new Treasury supply month after month is not going away. For a bullish stock market outlook longer term, the Fed would need to recommit to buying or financing the lion’s share of that supply. That would mean a return to QE.
For now, I don’t see the excuse for that.
During Monetary Policy Uncertainty – Technical Analysis Holds The Key
In such an environment of monetary uncertainty, technical analysis becomes the pre-eminent mode of determining correct market positioning. Every week in Lee Adler’s Technical Trader, I present my analysis of 8 proprietary charts to tell you where the market is probably headed. The reports include price projections for where the current trends may end. If you are a bear, some of these current projections are downright scary.
But there’s no guarantee that they will be reached. They’re out there, but they’re not carved in stone. That’s why I track the technical charts closely for any sign of directional change. We may have long side positions or hedges in place, but they may need to be lifted at any time.
Here’s my latest report, posted Monday, February 25, 2019. Warning! These reports are not an easy read. They’re not for everybody. But if you have an interest in seeing the technical side of the market in a way that no one else will show you, then my Technical Trader reports could be just right for you. Every week they include a recommendation on whether to buy or hold calls or puts on the SPY ETF for the S&P 500 to hedge or amplify your portfolio positions.
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