I am patiently sitting in Cash (100%) waiting for the next opportunity. The Fund’s portfolio went to all Cash on October 4th after my sell stops were triggered and have only been lightly invested (25%) for about three days since then. I believe market risk is high, and I am more concerned with the return “of my money” instead of a return “on my money”. The S&P 500 Index is trading near its low established on 10/29/18. However, the NASDAQ is trading near it April lows, so I would not be surprised to see the S&P slide into its May lows of potential support which would be another 2% decline. The trend is certainly down, and earnings have been decelerating. I believe we are due for a bounce, so the next few days could tell us if we have found support or we could be entering into a Bear Market. I am now in the Bear camp unless some type of positive catalyst is able to establish a bottom. I believe it would take something like the Fed deciding to NOT raise rates in December or Trump cutting a Tariff deal with China to possibly stop the bleeding and turn this market around. Even that may not be enough to stop the institutional selling that I have been witnessing and that is what I am concerned about. Knowing when to get out of the market is just as important as know when to get in. However, it is now what you know that counts, it is what you DO that makes a difference. (Portfolio holdings are subject to change at any time and should be considered investment advice. There is no guarantee that any investment product or strategy will achieve its objectives, generate positive returns or avoid losses.)
Hope is not a Strategy. I believe every investor should plan their trades and trade their plan in order to successfully traverse the ups and downs of the market. Being independent and flexible allows me to know the target entry/exit points and volume criteria I want to see before I invest. I try to always have an exit strategy in case the trade does not go as expected. Taking a position without good fundamental and technical reasons and instead “hoping” that it goes up just because I like the story is not prudent in my opinion. Hope investing can be very dangerous because it tends to feed on one’s emotions. Fear and greed are two powerful emotions we should all learn how to manage, or it could damage our portfolios. Always be prepared with a plan for managing your risk and execute your plan.
Investor’s Business Daily (IBD) current outlook is “Market in Correction”. Historically, IBD has a pretty good record of keeping investors in the major advances and avoiding the steep market declines. IBD has a lot of online tools to help the individual and institutional investors and I value their services like Market Smith, Leader Board and e-IBD (digital newspaper). They also have archives of webinars and weekly market recaps that I have found useful. William J. O’Neil founded IBD and the CAN SLIM system to help investors succeed in managing and growing their money. I am not affiliated with IBD nor am I compensated by them. I am just sharing what I am using hoping it somehow helps you.
Oil is down about 33% since 10/3/18! Oil has been on a slippery slope as more supply comes on the market and global demand appears to be declining. If global demand for oil is truly decreasing, that might be one of the reasons the market is down about 10% since oil peaked. Germany who leads the E.U. economically reported its worst growth in nearly 6 years at a recessionary -0.2%. It is very interesting to note that oil prices peaked near the same time the market peaked and I do not believe that was a coincidence. The dollar has also rallied almost 4% since the middle of September which also puts pressure on the price of oil. Junk Bonds are also confirming to me that “risk is off” and default risk is a concern for junk bond holders. Junk bonds have declined about 4% since 10/1/18 and that is a major “red flag” to me. Remember, the Fed is no longer in a “QE” Expansion mode but a “QT” Tightening mode and as they drain liquidity stock prices tend to decline. Declining oil prices could be like a tax-cut to the consumer allowing us to have more pocket money to spend for Christmas. Lower oil prices could be a back-door way to influence the Fed to not raise rates in their efforts to tame inflation. Bid to cover ratios for 30yr Treasuries is at its lowest point since the 2008 crisis!
Bottom line: I believe risk is high and not deserving of my hard-earned-money. However, the more I think I know, the more close-minded I become so I try to remain humble and have a teachable spirit. In order to be successful in the market, you need to think independently and admit when you are wrong. Otherwise, you run the risk of learning things the hard way!
PS: Bitcoin has declined about 80% from the $20,000 peak in December to less than $4,000 on 11/23/18.
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Important Risk Information
Mutual Funds involve risks including the possible loss of principal.
The Fund may hold cash positions when the market is not producing returns greater than the short-term cash investments in which the Fund may invest. There is a risk that the sections of the market in which the Fund invests will begin to rise or fall rapidly and the Fund will not be able to sell stocks quickly enough to avoid losses, or reinvest its cash positions into areas of the advancing market quickly enough to capture the initial returns of changing market conditions. The Adviser’s judgment about the attractiveness, value and potential appreciation of particular asset classes and securities in which the Fund invests may prove to be incorrect and may not produce the desired results. NLD Review Code: 9073-NLD-11/26/2018