The Issachar Fund (LIONX), is in a Defensive Cash position patiently waiting for our next opportunity. I did not make any changes last week as the market could not muster enough momentum/catalyst to break out about above the July and September highs of resistance. The market looks “toppy” here and I do not see a catalyst to move us past this line of resistance which is less than 1% away. Better than expected earnings and optimistic forward guidance could propel the market higher but I am not seeing that in the earnings that have already been released. Actually, I am seeing more stocks come out with good earnings and good guidance then the “algos” work to rip stocks lower. I have watched many former “leaders” like the “cloud software stocks” quickly become “laggards” and that tells me risk may be elevated and likely best suited for “traders” instead of “trend-followers”. My risk on/off junk bond indicator shows that junk bonds are trending higher (risk on), but prudence cautions me as junk bonds approach a ceiling of resistance which could serve as a longer-term high-water mark. I believe that we are stuck in a 6% trading range since July 26, 2019 until something gives on earnings, China Trade or the impeachment front. However, if the market finds a way to penetrate resistance, I will be looking for ways to participate in the advance. LIONX is a BRI, Trend Following, Liquid-Alternative Mutual Fund that is Actively Managing Risk like a Hedge Fund seeking low-correlation/beta/risk to the stock indexes. When my Strategy identifies a low risk environment, I seek to invest in junk bonds/growth stocks with strong technical chart patterns and sound fundamentals. During high risk environments I seek to avoid Life-Changing losses. The Issachar Fund seeks moderate capital appreciation consistent with capital preservation. (Portfolio holdings are subject to change at any time and should not be considered investment advice.)
The Fed Futures are predicting a 91% chance of a ¼ point Fed Funds rate cut at the October 30th meeting. One week ago, that probability stood at 67%, so the market appears to be predicting the Fed will lower rates in less than two weeks. With such a high probability of a rate cut, one might think the bond market would be rallying. But it’s not and yields are actually trending higher! Yields have put in a higher low and an up-trending line could be drawn across the lows, but we are also approaching a longer term down trend in yields which brings us to an interesting juncture and potential inflection point. Interestingly, the euro has been rallying strongly (as German bond yields rise) since the 9/30/19 bottom and the dollar has been rapidly sinking since its 9/30/19 top. I believe it has a lot to do with how the market is positioning itself ahead of Brexit. Senior officials in the British government said Britain will leave the European Union by the end of the month, despite the Prime Minister’s request for another extension to the Brexit deadline on October 31. The British citizens have already voted to leave the EU, but the politicians think they know better and have not done what they were elected to do. Does that sound familiar?
America is experiencing slower economic growth and the Fed knows it! China just reported their slowest GDP growth since 2008! The Fed recently announced a QE “lite” version of monetary expansion to the tune of $60 billion/month of short-term treasury repurchases. When the Fed buys bonds, some of this new money created out of thin air could potentially find its way into the stock market but it might be “different this time”. The Eurozone just restarted QE again and Japan never really stopped so there is a concerted effort to print money and devalue currencies in hopes of creating economic growth. However, I believe we are closer to the end of a diminishing returns era where QE has less and less impact (like pushing on a string) at creating economic growth. Remember the lower rates drop, the less power the Fed will have to spur us out of the next recession. I believe the dollar may have put in an intermediate term top. The recent rapid decline in the dollar may spark a “flight to safety” and gold may start to shine again. I hope that I am wrong but that is what I am seeing in the charts. Never forget that Cash is a Position!
Bottom line: The stock indexes are trading above their 50-dmas and junk bonds are trending higher. However, the indexes and junks are up against significant resistance and I do not see a catalyst to move us past the highs. Therefore, we could chop a while and head lower until the market finds a catalyst. The party does not appear to be over, but it could be getting close. Thanks for Your Trust and Patience!
Here is a link to the latest 3rd Quarter Issachar Fund Fact Sheet
Biblical Responsible Investing (BRI) is the term used to describe the activities of Christian investors who purposely align their investment choices to support their Christian beliefs. The Fund is ESG (Environmental Social Governance) conscious, pro-life and pro-family and will not invest in securities with a negative InspireImpact Score.
I challenge you to read what God is doing in Liberia and support my Christian Brother (Eric Wowoh): (God’s Grace is sufficient, and His Mercies are new every day!)
Investors should carefully consider the investment objectives, risks, charges and expenses of the Issachar Fund. This and other important information about the Fund are contained in the prospectus, which can be obtained by calling 1-866-787-8355 or visiting https://www.LIONX.net. The prospectus should be read carefully before investing. The Issachar Fund is distributed by Northern Lights Distributors, LLC., member FINRA/SIPC. Horizon Capital Management Inc, Inc is not affiliated with Northern Lights Distributors, LLC. Important Risk Information Mutual Funds involve risks including the possible loss of principal. The Fund may hold cash positions when the Adviser feels that the market is not producing returns greater than the short-term cash investments in which the Fund may invest. Municipal securities backed by current or anticipated revenues from a specific project or specific assets can be negatively affected by the inability to collect revenue, for the project or from the assets. Moreover, an adverse interpretation of the tax status of municipal securities may make such securities decline in value. 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. If the Fund’s uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss. The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments. 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. Past performance is no guarantee of future results. If the Fund’s uses hedging instruments at the wrong time or judges market conditions incorrectly, the hedge might be unsuccessful, reduce the Fund’s investment return, or create a loss. The use of leverage can magnify the effects of changes in value of the Fund and could cause investors in the Fund to lose more money in adverse environments. Algorithmic trading (Algo’s): is a method of executing orders using automated pre-programmed trading instructions accounting for variables such as time, price, and volume to send small slices of the order out to the market over time. NLD Review Code: 3808-NLD-10/21/2019