Market Update: 05-20-19

The Fund holds 15% in Muni Bond ETFs and 85% in Cash.  I like what I am seeing in the muni bond space, especially high yield muni bond ETFs and mutual funds.  I added two muni ETFs as a starter position with plans to possibly add more if things work out the way I anticipate.  I typically “test the waters” with small positions and if they “work” then I try to add bigger positions as I get more conviction in the trade.  On a risk-adjusted basis, the muni bond sector looks attractive at this juncture in anticipation of a slower economic environment.  According to fund tracker EPFR Global, investors pulled $19.5 billion out of global mutual funds and ETFs in the week ended May 15, while bonds added $5.1 billion for their 19th week of inflows.  There is the potential for the stock market to make lower lows.  However, I believe that we are one tweet away from a rally or one tweet away from a sell-off, so stay alert. Chinese trade tensions have not eased and may have gotten worse.  Trump feels that he is in the driver’s seat when it comes to trade negotiations with China and sometimes, he pushes the envelope …because he can.  However, China sold the most Treasuries in almost 2.5 years in March, offloading over $20 Billion taking China’s Treasury holdings to $1.12 Trillion.  I believe the Fed will buy whatever China sells so I am not too concerned […]

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Market Update: 05-13-19

The Fund holds 100% in short maturity cash equivalents.  Cash is a position!  I sold all stock positions last week as the market declined following a Trump Tweet promising to raise tariffs on Chinese imports by Friday if the Chinese did not give into his demands.  The market lost about 2% last week.  When the market is not rewarding me for taking risk, I prefer to reduce exposure or simply step aside and let the market do what it needs to do.  Imagine doing a planned retreat to hilltop on a battlefield to get a better view of what you are up against.  Once we clear our minds and get a vision of where we are headed, then we can plan our attack.  In a sense, going to an all cash position allows me to clear my head and refocus on my objective.  Once I am convinced the market may reward us for taking risk, I will carefully reenter the market.  However, most of the previous stock leaders are not acting like leaders so I will patently wait for the leaders to show me they are ready to “act right”. The S&P 500 Index futures are pointing to about a 2% decline on Monday morning.  Tensions with Iran and potentially more Chinese tariffs seem to be spooking the market at this time.  The market traded lower last week on a sell-the-rumor; buy-the-news bounce-off-support reversal-rally on Friday.  We could see the Chinese retaliate; however, they import […]

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Market Update: 05-06-19

The Fund holds about 85% in short-term bonds and about 15% in stocks.  I sold stocks that were not performing as expected last week and purchased new ones which appear to have strong fundamentals and sound technical chart patterns.  It has been a frustrating year for risk managers, but I am confident that my strategies can keep us out of major declines and keep us in during major advances.  If my current positions start to work (make money) then I plan to increase exposure if we are rewarded for taking on more risk.  However, if these positions start to roll over (lose money) then I plan to do what is necessary to minimize losses.  I am cautiously optimistic but that can quickly change depending on market conditions. The US stock futures were pointing to a sharp decline at the open!  President Trump tweeted that he intends to impose additional tariffs on Chinese imports as trade talks progress “too slowly” and the market does not appear to be happy about that.  The S&P 500 Index was trading near all-time highs so I would not be surprised to see the indexes use these “trade fears” as an excuse to retreat a bit.  However, this could be the start of a major market decline and we should never ignore the warning signs.  Just because the market has always “come back” and has made new highs does not mean that it will “come back” when you are ready to […]

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Market Update: 04-29-19

The Fund holds about 85% in short-term bonds and about 15% in stocks.  I added to our stock positions last week and I expect to increase stock exposure this week if earnings come in better than expected.  A few leading growth stocks were crushed after releasing negative earnings and guidance last week, but I am finding many more leading stocks rallying after positive earnings surprises.  This is very encouraging to me because I believe the “leaders” (best stocks in the best groups) often pave the way for the indexes to follow.  I am more optimistic than last week as I “follow the leaders” and trust they will tell us when there is trouble ahead. Real GPD for the 1st Quarter grew at an annualized rate of 3.2%!  This is far above expectations and the market seems to like this kind of positive economic growth.  Inflation is very low, and bonds are also doing very well.  Junk bonds are confirming the euphoria and trending higher indicating to me that investors still have a hungry appetite for risk.  Two-year German, French and Japanese bond yields have negative yields while the 2-Year US Treasury bonds yields a positive 2.3%. Imagine loaning money to Germany, France and Japan and having to pay them interest to loan them money.  It makes no sense to me but that is what is happening across the pond.  I pray that will never happen to us but that is what can happen when government […]

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Market Update: 04-23-19

The Fund is about 95% invested in short-term bonds.  I sold stocks as sell limits were triggered as money appears to be flowing out of growth.  It has been a difficult environment for growth investors as leading stocks after the 12/23/18 low get hit with waves of selling due to profit-taking and short-selling which tend to suppress prices even further.  I am cautiously optimistic. The trend is still up but stiff resistance is just ahead.  The S&P 500 Index (large-caps) is less than 1% away from an all-time high.  However, the Russell 2000 (small-caps) is about 10% from its all-time high and I consider that a yellow caution flag.  The small-caps can under perform the large-caps for a short period, but I prefer to see the small-caps lead on a relative basis.  A small-cap dominance indicates to me that investors are okay with taking on more risk.  However, that does not appear to be the case currently.  It could be that the market is predicting a favorable trade deal with China and that could benefit the large-cap exporters more than domestic small-cap companies.  Bottom line, the trend is still up but I would not be surprised to see a “pause” before the market truly breaks out of this V-shaped pattern.                    Defensive sectors like consumer staples, healthcare and utilities are not leading.  This tells me that the market is not concerned with economic growth slipping into a recession as it was in Q4.  Healthcare […]

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Market Update: 04-15-19

The Fund is about 93% invested.  We have about 78% in short-term bonds, 15% in growth stocks and 7% in Cash and I am hoping to increase stock exposure shortly.  I believe all eight growth stocks have excellent fundamental and technical characteristics and appear to have sound chart patterns.  I am seeking the “best of breed” stocks in the industries that seem to be under accumulation.  The cloud, software and cyber-security industries look very attractive to me at this time. The major indexes are at or approaching significant resistance and I would not be surprised to see a pull-back or consolidation.  The trend has been up since the Christmas Eve low and I am expecting the trend to continue with earnings coming in better than expected.  I do not like to play “earnings roulette” so I will likely not hold any position into its earnings release date.  The risk of an earnings or revenue miss, and a stock dropping is a risk I am not willing to take.  However, if I have a “cushion” or a substantial profit in the position, I may consider holding it through its earning release.  Either way, I would rather miss an opportunity than lose money.        Stocks seem to be buoyed by the expectation that the current economic slowdown will be just a slowdown and not a recession.  The economic outlook on March 19 as represented by a steep drop in the bank stocks was for a severe economic […]

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Market Update: 04-08-19

The Fund is about 40% invested in short-term bonds with 60% in Cash.  I sold several stocks as stops were triggered and placed all proceeds in cash since bonds look a little extended.  Many of the Cloud and Software names were hit with heavy selling (especially on Thursday) as sellers dominated buyers.  The Cloud and Software stocks were two of the best performing sectors coming out of the Christmas Eve low, so they seemed “ripe” for profit taking.  If the market is about the stocks first and the indexes second, does this leading group breakdown bode badly for the market?  Time will certainly tell.  This heavy selling in the better performing sector leaders reminds me of the period prior to the 19% market drop we witnessed in Q4.  So far, it just seems like profit taking and sector rotation, but I would not be surprised to see some more selling spill over into other “hot” areas and then possibly the indexes. Large caps are outperforming small caps which is okay, but I would like to see the opposite as a possible confirmation that “risk was on”.  The broad market is in an uptrend and the major indexes are approaching the Q4 all-time highs albeit on lighter volume known as “wedging”.  I believe declining volume and rising prices (wedging) does make the “semis” more susceptible to pullbacks so I will be watching this closely for clues as to our next potential opportunity.  Junk bonds are trending […]

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Market Update: 04-01-19

The Fund is 83% invested (80% bonds, 17% Cash and 3% equity).  As my stock positions hit sell signals last week, I placed the proceeds in short-term bond ETFs and Cash since I could not find low-risk entry points in high quality leaders.  This is similar to what I was seeing in the 4th quarter of 2018 which then led the market into a 19% decline that bottomed on Christmas Eve.  I am not saying we are headed lower from here, just that we made need time to let the market reveal its next move.  My opinions, convictions and predictions are not always right so I rely on the charts to tell me what the market is doing, and I seek to act accordingly.  If my watch list of stocks develops opportunities for entry, then I plan to buy them and then follow my sell disciplines.  I believe buying right is my first line of defense and a major component of sound risk management.  The trend is still up and maybe we just need a little more time and patience to consolidate the recent gains.  I feel this six-day consolidation has been orderly, healthy, and necessary and many leading growth stocks are building second-stage bases that will hopefully lead to higher prices.  Patience takes patience. Two Friday’s ago, the yield curve inverted and sent a shocking message through the markets that a recession could be on the way.  I do not know if I see […]

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Market Update: 03-25-19

The Issachar Fund (LIONX) holds about 52% Growth Stocks, 28% Short-Term Bonds and 20% Cash. I sold stocks that triggered my sell criteria in Friday’s decline. I stand ready to further reduce exposure as needed should the decline accelerate. I am concerned that this sell-off may be the start of a more serious decline, but I will let price and volume dictate my actions. The Fed released (last Wednesday) that it expects ZERO rate hikes in 2019! The Fed also said that Quantitative Tightening (shrinking of its balance sheet as Treasury and mortgage securities mature) will conclude at the end of September. The market seemed to like these statements and proceeded to rally on Thursday. On Friday, the yield curve (3-month T-Bills – 10yr T-Bonds) inverted for the first time since 2007 and the market declined about 2%. The last 3 times this happened, we had a recession. That said, this does not guarantee a recession mainly due to the unprecedented levels of debt monetization or Quantitative Easing (QE) in the system. The yield curve slope has been flattening for quite a while. That tends to reduce the profit margin for banks because banks borrow funds at the short-end of the curve and lend at the long end of the curve. If a flat curve means there is little to no difference between the short and long rates, bank profit margin normally shrinks. If the curve inverts, lending can shut down as banks find it […]

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Market Update: 03-18-19

The Fund is about 95% invested in 2 Short-Term Bond ETFs (45%) and 35 Individual Stocks (50%) with 5% in Cash.  I continue adding to positions at opportunistic buy points and taking on new positions as they present themselves.  I try to buy the best “merchandise” (stocks) in the strongest sectors and hold them until they no longer meet my expectations.  The Software and Medical Sectors are our biggest weightings and those themes seem to be very much in favor among institutional investors.  When institutions decide to buy into a new theme or sector, they tend to leave big “foot-prints” as they accumulate shares.  I try to follow in their “foot-steps” and ride the “wave” until it fades.  As I see it, institutions are in the “accumulate” mode and so am I, until ……the trend changes.  I like what I am seeing in the market as prices head higher on higher volume.  All of the major market indexes have moved to their highest level on strong volume since the Christmas-Eve low.  The S&P 500 finally pierced through the “2800” level successfully after three previous attempts.  The small-cap Russell 2000 Index is the only major index trading below its 200-day moving (dma) average and could be ready to play “catch-up” as it “huffs and puffs” to stay above its 20-dma.  The S&P 500 is only about 3% from its all-time high and I believe “the high” will serve as a level of resistance.  However, the market […]

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