May 25

Predictions and Prognostications

“It is exceedingly difficult to make predictions, particularly about the future”

That quote, from Danish physicist Niels Bohr (1885-1962), and subsequently attributed to Sam Goldwyn and Yogi Berra in varying forms, is an undeniable truth that anyone who has tried their hand at forecasting the stock market can attest to.

I thought it would be an interesting exercise to demonstrate just how difficult it is, with a few examples of predictions or market calls that have been made in the last five years, plotted on a chart of the S&P 500.

My sincere apologies if your favorite bearish prognosticator isn’t on here, there were just too many to choose from, so I tried to get a mix of one-timers and repeat-offenders. I hope they all have a sense of humor, and I imagine that given most are in the public eye they already have a fairly thick skin, as it must be hard to take the heat they do in such an unforgiving arena. And yet many still try their hand, unbowed by the relentless bull market before us.

AlphaCapture

To be fair, some of these predictions are still current, so you never know, they could still be right!

It’s interesting that some repeat-offenders are getting a bit smarter, by being a little open-ended or less specific with their timing, and most recently pushing their forecasts out a full year ahead of when they make them. Should it come to pass before then, they will probably have the gall to say they were early!

The point is, prediction is futile, and besides, it isn’t even necessary to make money in the market.

Whatever your methodology – fundamental, technical, value, momentum – if you’re in the business of trading for a living or managing other people’s money, you know as well as I do, it’s about assessing probabilities, risk/reward, position sizing, being disciplined and managing risk, knowing where and when you’re wrong.

But there’s very little evidence of that on show in these market calls, and why should there be? Most of them aren’t money managers, they’re economists, newsletter writers, authors, or columnists. Most can predict without consequence because they’re not held accountable and they’re not regulated. Why you would seek their advice then is beyond me, but many do.

If I need advice on something, I tend to seek the opinion of people who already do it for a living. In my experience, people who have been successful and have something worthwhile to share often got help themselves from others along the way, and are happy to give back.

If you want help managing money, ask a money manager, if you want financial advice, ask a financial advisor, and if you still need a prediction, you need to re-read this post.

 

 

 

 

 

May 25

Weekend Review and Watchlist

The market followed through with fresh all time highs this week, but only marginally so, continuing to frustrate bulls and bears alike with its narrow trading range. Here’s the $SPY:-

Despite the higher highs and higher lows in evidence, you can see the choppy price action this year and how hard it must have been for many to navigate, crisscrossing its MA’s the whole way.

Let’s take a look at some other areas worth noting.

Although the Russell 2000 remains below its highs, it gained for the third straight week, making April’s weakness look like a simple retest of its breakout level, with it now ready to resume higher.

 

Biotech ($IBB) continues to recover very strongly and is again on the verge of new highs.

 

Turning to the nine S&P Sector SPDRs, Technology ($XLK), and Healthcare ($XLV) are once again leading the way, with Consumer Discretionary ($XLY) not far behind, having recovered from a break of its 50-day just over a week ago.

 

Using sectors and individual stocks as our guide rather than the market itself has certainly made it easier to identify where the areas of real strength reside and make those our focus. That paid off again this week with our Marketfy portfolio gaining 1.1% vs 0.2% for the S&P 500, almost a repeat of the previous week. Year-to-date that takes us to +10.9% vs +3.3% for the S&P.

Full analysis and commentary on current signals, as well as entry/exit posts, additional trade ideas, and a comprehensive watchlist is available here.

Although there were no entry or exit signals this week, by Friday’s close we had a lot of changes to our stops, either through new highs that allowed us to trail higher, or where failing to take out new highs and stalling, our invalidation point was brought that much closer, thereby reducing our risk.

I continue to believe with the market at all time highs, broad sector strength, and underlying skepticism towards further gains, the path of least resistance remains higher.

This week was all about sitting tight and letting our winners run. There was nothing to do, so we did nothing. There were no exit signals or new entry signals, either in our Marketfy portfolio or among the additional trade ideas.

Our watchlist continues to reflect the strength in technology, healthcare, and consumer discretionary, as well as the improvement in industrials and financials.

Here’s a sampling of 12 from the full list of 30 names:-

$GS

 

$AIG

 

$GD

 

$CF

 

$AET

 

$VRX

 

$BLOX

 

$RHT

 

$SWKS

 

$IACI

 

$MHK

 

$PZZA

Full analysis and commentary on current signals, as well as entry/exit posts, additional trade ideas, and a comprehensive watchlist is available here.

 

 

 

 

 

 

 

 

 

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