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Where Do We Go From Here?

By  +Follow October 21, 2013 4:08PM
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As most polls show, I think it is fairly safe to assume that I won't insult anyone (left or right... unless you are at the extremes, which I am quite sure none of my subscribers are...) if I observe that neither the Legislative nor Executive branches of government have shown themselves to be capable of effective leadership nor have the ability to stop or even slow down the runaway entitlement (nanny) state we are becoming.

The only good thing (at least as far as stock prices go) to result from the pathetic and embarrassing display of partisan politics over the past few weeks, is the crisis in decision-making is now behind us and there won't be another one until mid-January of 2014. This gives us a couple of months to make money in the market without having to deal with the excrement coming out of Washington.

So... Where do we go from here?

The time-cycle forecasts have become quite a bit more optimistic (if you consider Bullish biases, optimistic) in the near-term. I plan to add several new trades to the Signal Investor (if you are subscribed to this service, you will see an email on my planned trades this coming Tuesday). How optimistic, you may be asking? Take a look at the Russell 2000 (IWM) forecast, below right:

As you can see, the forecast has a bullish bias for the next 90 days.

It is important to note that not all 4 of the major indexes are correlated for the entire 90 days with the Russell. However, 3 out of 4 of the index forecasts (S&P 500, DJIA and the Russell 2000) all agree that the next few weeks look to have more bullish pressure to the upside. Only the Nasdaq is bearish.

This pattern of correlation among the major indexes is a growing shift from bearish bias for the past few weeks to a more bullish bias. As such, I am looking for opportunities to buy.

 


Closing Thoughts...

As our great country becomes more and more polarized with those on one side believing the best way to solve all social issues is to spend more money, redistribute wealth, put more people on food stamps (the new farm bill) and raise taxes on anyone who works for a living.

On the other side, there are those who believe in smaller government, less taxes, more incentives to get people off of welfare and into productive society, less government intervention and more opportunities for people to prosper as a direct result of their own (not government's) initiative.

And, of course, there are many variations of the above.

You might ask, reasonably enough, what-the-heck-are-you-doing-talking-about-politics-in-a-financial-newsletter...?

Not trying to be obtuse with my answer, let me share something with you about my Sabinal Capital money management clients... My clients come from vastly different backgrounds and have significant differences in their financial situations. But, nearly all of them have one common concern:

They all believe, as do I, that our country cannot continue to write checks it cannot cover. We all believe that one day, probably in the not-too-distant-future, there will be a day of reckoning. Interest rates will have to move to where they are not being artificially kept low under price fixing by the Fed. One day, the raging bull market could move into a raging bear trend. None of my clients want to experience another 2008.

As such, they know that my Sabinal One portfolio is designed to move into inverse ETFs when the markets move into bear trends. They know I have designed the Sabinal One portfolio to be long in bull markets and short (via inverse ETFs) in bear markets.

Most of my clients also believe that the government and politics play an inordinate role in when that fateful day comes. As such, we all remain vigilant to what is happening in Washington and around the globe, for that matter. Some of my clients are quite liberal, politically. Some are quite conservative. But, all of them realize a 2008-type event is far more likely than not.

There is no doubt that it is certainly 'possible' for the market to continue its bull trend for many more months or even years, but no one wants to lose 50% or more of all they have gained by not being ready to move into a short-biased strategy at the 'right' time.

This is why I like to say that, "I am a long-term investor... one-week-at-a-time!" I am bullish and strongly so at the moment. But, I reserve the right to change my mind by this time next week if my analytical and tactical quantitative software programs indicate the market has begun to shift into a less bullish condition.

I watch the market, the politics, the global economic issues, etc. I would prefer to never mention politics or a politician again in any future missive. But, since politicians force their will upon an often unsuspecting population, one of my jobs is to look into the future and attempt to discern how political decisions will impact our ability to make profits or lose those profits in the stock market.

You and I may not always agree, politically. But, one thing I am sure we will always agree on... None of us want to lose our hard-earned profits because of a reversal in the stock market.

I'll do my best to let you know when I think it's time to switch from a bullish stance to a bearish stance. That time is not today... at least not according to the output from my software systems.

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By  +Follow October 21, 2013 4:08PM
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