And no, it’s not TA, it’s just good old Fundamental Analysis and our 5% Rule™, which is not TA, it’s just math. There simply wasn’t enough value in the Nasdaq 100 nor was there enough likelihood than any of the upcoming components would push us over the very strong resistance line of 12,000, which is the Strong Bounce line on the fall we’ve had from 15,000 (the rest was an overshoot we predicted as such).
This is why our Short-Term Portfolio is up 1,824% (18x) since 10/28/20 (when we started with $200,000) – it’s a lot easier to make money when you know what is likely to happen next. By simply not believing in TA Voodoo, we are able to make much more rational short-term and long-term bets along the way.
The chart we had yesterday was our Nasdaq WEEKLY chart and we’ve been using it since the 2020 crash to tell us where the range would be on the Nasdaq 100. I know it’s confusing but TA is part of our Fundamental Analysis – simply because so many people follow it, we have to take it into account. If I were studying college students, I would tell you that they tend to drink more, take more drugs and have more sex on weekends and I could chart it, but that doesn’t mean TA is real – it means Fundamentals can be charted – and that’s not the same thing at all.
This is our much more volatile S&P 500 Daily Chart and those are the same lines we’ve been using since the 2020 dip as well. They predicted the rally and, as with the Nasdaq – we didn’t change the value lines just because the S&P went up to 4,800 – we just treated it as oversold and enjoyed the ride while it lasted.
We never changed the lines because the VALUE never changed and, eventually, value does get reflected in the price – eventually. Overall, we’re expecting a flat to down year for the S&P 500 and the only reason these lines will change is if the earnings of the S&P 500 change enough to move our range – that hasn’t happened in 3 years.
If you know your proper trading range for the index, it’s like know where the banks of a river are. The river may wind up and down and it may sometimes get flooded (more liquidity) or it may sometimes get dry but knowing where the banks are SUPPOSED to be means we can more accurately predict what will happen to each individual leaf that’s floating in that river. Though the individual leaves are hard to predict – the overall flow is not, right?
In this case, we’re watching the individual leaves (earnings) and they will give us a sense of which way the current is flowing on the river (our long-term ranges) but, as I noted, there’s going to have to be a lot of evidence before we change our mind about where the banks are. That has come from some very long-term observations we’ve made.
Earnings have gotten off to a rough start with the Financials last week and we were at about 50% beats and this week we’ve moved up to 66% but anything under 70% is BAD and some people, like MSFT last night and KMB & T this morning, are beating but guiding lower.
Good morning. Here is the link to today’s webinar
https://attendee.gotowebinar.com/register/187215373084463193
Good Morning.
Good morning and wheeeeee!
“What can be done can just as easily be undone” is one of my guiding principles in the market (though Shakespeare says the opposite in Macbeth). Anyway, that especially applies to Mondays and low-volume rallies.
Don’t blame the Dollar, it’s trying to help.
$80 is failing on /CL!
This is just the end of Feb getting sold, March is $3.11.
It’s the other way, the Feb contracts NGG23 are at 3.13 and the March contracts NGH23@2.975. Is it dropping just due to traders rolling from Feb to March contracts? What would the impact be if Freeport LNG restarts will that push IS nat gas contracts up and bring down price in European mkts
Yep, my mixup.
I was going to write about this above but ran out of time:
Our Members are very spoiled at PSW, where we think 40% annual returns on dividend stocks are “boring” but, for normal investors, they are thrilled to get 10% in the market and now you are getting paid 4% for CASH!!! – it makes the riskier market much less attractive – especially when there’s talk of Recession and earnings seem erratic or, even worse, disappointing.
Money flowing out of the market dries up that river and leaves a lot of stranded leaves – despite their individual merits.
So there’s more money in money market funds now than there was when the market collapsed in 2020 – that’s a real house of cards we’ve built with little support…
Mr. Chang has recommended that clients lower their stockholdings and add to their cash positions to have dry powder ready to deploy for an attractive buying opportunity.
Now these guys could be wrong because clearly the supply of money is up considerably since 2020 so the natural levels of CASH!!! may be a lot higher than they were at the time. Our portfolios were much smaller in 2020 and now we’re mainly in cash but the portfolios still hold more stocks now than we did back then – the two can co-exist and, as we know, the investing class added $24Tn to their bottom line in the past 3 years.
So something to consider but not panic over but consider the fact that others will panic. More Fundamentals…
hi Phil — on /NG – The march contract seems down below 3. I am assuming you are still holding your longs (sorry if missed any earlier updates on that)
Wow, yes $2.98 is so stupid! I have 2 long but getting 2 more now. Fortunately rolled out of the Febs before it collapsed but still nursing a loss.
I’d say, as a rule of thumb, with bonds paying 5%, P/E ratios over 20% are going to be generally out of favor (taking growth into account, of course) as the S&P will move back to it’s “normal” 16x kind of valuation.
In Q3, the S&P 500 earned $44.41 per share so x 4 is $177.64 and /ES is 3,974.25 so /$177.64 = 22.37 x earnings – still way high – 28% too high actually. 0.72 x 3,974 is 2,861 at 16x so earnings better be growing fast enough to cover 28% (7% a year ought to do it) or we’re not going to hold 4,000.
Now, keep in mind we’re coming off a record year for oil profits and, of course, no more stimulus – so it’s going to be very hard to improve on last year and, as we saw yesterday, WMT is raising 2M employees salaries by $2 (exactly as I predicted – thank you very much) but that’s 2M x $2 x 40 x 52 = $8.3Bn and WMT only makes $16Bn a year so either they raise price on $600Bn in sales by 1.3% (more inflation) or they’ll take a net hit on profits.
Remember when we did the math on MCD and proved they would actually benefit from paying employees more and raising prices to cover it? Same goes for WMT and most corporations. As Henry Ford realized in 1914, raising wages is actually a good thing because people can afford your products.
Still, there’s a transitional phase and we know consumers have been bucking price increases. I doubt 1.3% will kill WMT but not every company sells 10% of all retail merchandise (AMZN is $500Bn including cloud and Prime, etc), so they will have to bump prices up considerable more to stay wage-competitive.
These are all things we’ve discussed last year in our outlook for 2023 and it’s coming together just as we expected but we expected a defensive year – don’t be impatient on Jan 25th!
Marko Kolankov (JPM) is pricing a mild recession at S&P earnings of 200-205, and 180 as the bear case. Either way, seems more downside
Last 3 Q earnings were $45.99, $42.74 and $44.41. Last December was $53.94 so that’s $187.08 so if this Q4 is the same as last Q4 that’s where we’ll be but, so far, most people are missing so maybe not $187 and then, if we have a Recession, by definition earnings won’t beat last year so the “bear case” may not be bearish enough.
That is why we are waiting and seeing for now.
13 out of 30 misses or guide-downs this morning. Not a good trend.
Crude inventory draw narrows from last week – EIA
UCO +0.99%
Jan. 25, 2023 10:36 AM ET
1 Comment
Not terrible but not good either.
Phil / ISRG – weak report, and took a hit today….. think this is good for selling some puts here? Has debt, but more cash (. 6.7B) than debt on books
Yes, they are on our Watch List, of course. I’d like to see them find a proper bottom rather than guess and this is still way too high.
The report was not great as they cut Operating Expenses 21% and that did not offset rising costs of goods. The downside to their model is they rely on the revenues from disposables that go with their system so increased costs there can be difficult to pass on to hospitals under contract.
Also of great concern is Cash went from $8.6Bn to $6.7Bn, which is a real WTF? that needs to be looked into. Maybe they paid down debt (they had $4Bn cash net of debt), but I’d want to be sure about that.
$244 is still not cheap at $91Bn with just $1.7Bn in earnings. I’m watching them because I like them and I’d like to get in if they get reasonable but there’s nothing reasonable about 50x.
Thanks,…. I missed the cash draw down…. they did pay off some debt but the not only use of cash… a PE of 26 may be more reasonable
/ES back over 4,000 again. Crazy!
Zelensky Removes Top Officials in Bid to Contain Corruption Scandals
T over $20 post earnings – I’m very happy about that!
It’s in the Dividend Portfolio (target $17), and the LTP (target $20) as big positions.
Oh and the $700 portfolio too! Also $17 target looking too conservative now.
Phil I want to subscribe and cant get anyone to respond to me. If I have a 100K portfolio what do you suggest i subscribe to?
Sorry about that. The Trend-Watcher is a good way to get started as you’ll be able to view the chat room (it’s open at the moment but not after next week) or Basic will let you ask questions as you’re doing now. You might want to start off just paper-trading and viewing chat until you feel comfortable enough to start actually trading and asking questions.
Wow, if you want to see how good it is to say goodbye to Trevor Noah, check out Wanda Sykes on day 2 of doing his job. They are going through a period of weekly guest hosts but almost anyone is better than Trevor. Reminds me how good the show used to be.
Can you help me on a NFLX position. I have 10 1/2024 NFLX 150/250 BCS that is deeply in the money. Personally I think that we are high in the channel .. Can you give me a better trade. Also, I did something wrong last week and ended up owning SQQQ outright (I had some of the SQQQ1). I would like to sell the shares and do an option trade instead. Any thoughts ..
The NLFX spread is net $84 out of $100 so only $16 to go for the year is 20%. If you can do better than 20% with your $84, no sense in staying in this trade.
2025 $300s are $132 and the $400s are $85 so net $47 has $53 (113%) upside potential using only half the money. That’s IF you want to stay with NFLX in the first place. You could and probably should consider investing in something that’s more of a bargain – which is why you made good money on NFLX in the first place.
As to SQQQ, I guess you were assigned but that’s no big deal – you just sell it and start again. Our STP position is still the one I like – it gives you great bang for the buck but remember it’s more like insurance – you are paying for it to protect you for a certain amount of time but you don’t buy a $100M life insurance policy for a person who’d be lucky to make $5M over their lifetime – it makes no sense. Your longs have to be making at least double (preferably 3x) what you’re spending in a flat to up market to cover the cost of the hedges.
Wow, nice recovery.
Well, that was a lot of work for a flat day. Durable Goods, GDP, New Home Sales, Wholesale Inventories and the Chicago Fed tomorrow.