Click here for the PDF Version – Market Watch – Short Term Divergences Resolving – Feb 8, 2021
“Good investment ideas are few and far between. Respecting the primary trend is a good investment idea.”
– Mark Ungewitter
Bottom Line: My view here remains that last week was a pullback in a longer-term uptrend and seems to have been started by a market disruption caused by high short interest in a few stocks, like GameStop. This is all to say: there’s not much to see here.
Summary: Mr. Market’s health readings (Breadth) is hot, growth and offense stocks are leading value and defensive stocks, higher volatility stocks are leading low volatility stocks, the Nasdaq continues to lead the S&P500, small caps are beating large caps, the equal weighted index is beating the S&P500, and stocks are beating bonds.
All reflections of a primary uptrend in stocks.
We will continue to carry some cash in the portfolios while our Buying Power Indicator remains cautious. However, this is why, when our Primary Trend Indicator (PTI) is bullish, it’s ok to be cautious at times but it doesn’t pay to be bearish.
Financial liquidity remains very high and the rotation between sectors continues to keep the averages propped up.
In the Markets
Overall breadth remains strong and rebounded well after the short and sharp pullback.
The most important point right now is how weakness in the short-term indicators we discussed in recent weeks were bought hard and pushed back higher with little to no reaction from the longer term PTI.
Until that changes, our view for 2021 remains constructive.
It is more important than ever to stick with the winners.
Conclusion:
We will always focus on risk management first, cautiously raising cash when stress begins to show in our indicators of market breadth and buying power.
We remain completely open to any eventuality that the markets bring. Our strategies, tactics and tools will help us to successfully navigate whatever happens as we focus on monitoring supply and demand signals that the market provides us.
I hope you had a very good weekend. If you have any questions about this update, or anything else please do not hesitate to reach out.
Peter Schenk, CMT, CIM | Portfolio Manager
Words we operate by:
“Deliver to the world what you would buy if you were on the other end. There is huge pleasure in life to be obtained from getting deserved trust. The way to get it is to deliver what you would want to see if you were on the other end.”
-Charlie Munger
“Strive not to be a success, but rather to be of value.”
-Albert Einstein
