I always say that people do not trade the markets; they trade their beliefs about the markets. In that same way, I’d like to point out that these updates reflect my beliefs. I find the market update information useful for my trading, so I do the work each month and am happy to share that information with my readers. If your beliefs are not similar to mine, however, then this information may not be useful to you. Thus, if you are inclined to go through some sort of intellectual exercise to prove one of my beliefs wrong, simply remember that everyone can usually find lots of evidence to support their beliefs and refute others. Simply know that I admit that these are my beliefs and that your beliefs might be different.
These monthly updates are in the first issue of Tharp’s Thoughts each month which allows us to get the closing data from the previous month. These updates cover 1) the market type (first mentioned in the April 30, 2008 edition of Tharp’s Thoughts), 2) the debt statistics for the US, 3) the five-week status on each of the major US stock market indices, 4) our four-star inflation-deflation model, and 5) tracking the US dollar. I also write a report on the strongest and weakest areas of the overall market as a separate SQN™ Report. Significant market changes may mean the SQN Report comes out more than once a month.
Part I: The Big Picture
Since the December 24 lows, the equity indexes have been on a steady rise. And we have now reached bull territory – but just barely. The S&P at the Christmas Eve close was at 2,351. In just over four months, as of this writing on May 1st, it is at 2949.83. That’s an increase of in just over three months of 25.4%. And we are over last Septembers high market of $2940.91.
The national debt recently surpassed twenty-two trillion dollars. And in three months it has increase another $250 billion. And your family’s share of the debt went up $4,000+ last month after going up $10,000 the month before. Did you make $14,000 over the last two months? And remember that all goes to the government for its new debt – there is nothing left over to live on.
According to the debt clock there ae 169.4 million people receiving benefits. I just include retirees (53.5 million), disabled (10.13 million), and food stamp recipients (37.4 million). That’s 101.03 million people supported by 122.65 million taxpayers.
A lot of newsletters are now warning of the collapse of the dollar to scare you into buying their product. However, I was worried about the debt when it went over a trillion. Now 21 trillion later, what is the difference? As you can see, since we’ve been doing these reports in 2013, it’s increased by $5 trillion.
Let’s look at the newsletter email headlines this month,
- Marijuana Millions
- Marijuana Windfall Investment Guide
- There were about five marijuana headlines from newsletters (I didn’t list them all).
- Technically speaking: A warning about this bull market
- I have heard from an investigative journalist that something big is about to shake the financial markets. And it’s all going down today.
- Crypto Haters: Here are 4 things you need to know.
- On a good day I can pull in way over $10,000 (and of course, it’s his information not his psychology)
I also usually get scary text messages that suggest there will be a new US Currency (cryptos?) or a Global Monetary reset or something of that nature. I find them all useful because none of them are believable and the worse they are the better I feel about the market. All these headlines are just garbage designed to get you to spend more and more money on newsletters.
Part II: The Current Stock Market Type Is Bull Quiet
This month, let’s take a look at the weekly bar chart for the S&P 500 which shows the late September top, the volatile down moves from October through December, and the rapid climb from the Christmas Eve low. There are only a few weekly down bars on the current uptrend.
I define the market direction based on the Market SQN using a 100-day period. For the end of February, the period began at the beginning of October – or 20 bars back on the chart. I also monitor timeframes from 5 weekly bars to 40 weekly bars. Given the bars on the chart, you can probably understand the direction for each of the periods –
- 200 days – Neutral in March, now Neutral (it’s been neutral since Jan 23rd)
- 100 days –Neutral last month, now Bull (off and on neutral/bull for the last week)
- 50 days –Strong Bull last month, now Strong Bull
- 25 days – Neutral last month, now Strong Bull
The chart below shows what happened to the 100 day Market SQN score for the past year. As you can see, it started climbing out of Strong Bear territory, it reached its low in late December, moving strongly since then and it is now bullish.
The last chart shows the volatility measurement for the last year – It’s now very quiet and that doesn’t suggest any sign of a concern.
Lastly here are the weekly changes for the three major stock indices for 2019. While the market may be neutral for most of the year, had you been fully invested at the beginning of 2019 you’d been up almost 13.79% in the DOW, 17.27% in the S&P 500, and 23.65% in the Nasdaq 100. These would be decent returns on the year, but we still have eight months to go.
My retirement account has now equaled it’s September highs in equity while being about 40% in cash and 20% in cryptos so most of the performance has been from the cryptos. Because the market is now bullish, I’m going to move to 20% cash. I’ll probably never be 100% because I’m a little conservative despite my huge “growth” positions. However, my objectives are not your objectives and my risk tolerance is not the same as yours.
Part III: Our Four-Star
The four components of the model were mixed again for the two timeframe measures in February
The inflation/deflation model has turned neutral. After three straight months of inflation which had a huge change in financial stocks which suggests that the inflation risk has cooled. Remember we have reached a point in our debt where the Federal Reserve cannot afford long term interest rate hikes – the cost to maintain our debt could not handle it.
Shadowstats.com still shows the inflation rate (the way it was originally conceived of in 1980) as being around 10%. With that adjustment in the GDP, it still suggests that we have been in a recession since 2000 with just one-quarter of non-recession.
Part IV: Tracking the Dollar
USD remains in an uptrend but was relatively flat last month. The current range is high in relation to where USD has been in many years. It’s at or near its one-year highs but is relatively flat.
So this month is enough to convince me that I should have a bigger investment position that I plan to hold until the market tells me otherwise (or until an individual position hits my stop).
Remember two months ago when it was still bear quiet that we said bear quiet doesn’t last long. The market was starting an uptrend that was quiet. That uptrend continued until it became sideways quiet and then bull quiet. That’s one way that markets can move out of bear quiet. Hopefully this “bull quiet” will last until the end of the year at least. Or maybe it will change next month.
Our purpose is not to predict but to merely reflect on what is happening right now. Stay in the now!
Until next month’s update, this is Van Tharp. Trade well and be happy.