Market Update: 01-14-19

The Issachar Fund (LIONX) is 100% in Cash patiently waiting our next opportunity.  I bought a few stock positions in LIONX last week (dipped my toe in the water) that did not perform as expected so I quickly sold them.  I believe the market is “ripe” for a pull-back as price approaches a “ceiling” of resistance.  On 12/21/18, the S&P 500 Index dropped over 2% on above-average “heavy volume” then dropped another 2.7% on 12/24/18 (Christmas Eve) to form the most recent low.  The S&P 500 has since rallied over 10%  higher into “resistance” since the Christmas Eve low on declining volume.  Historically, this bounce from the low is normal in a “correction” or Bear Market.  Correction or Bear Market “labels” do not concern me.  However, prices rising on declining volume “concerns” me of a potential “red flag” that “big money” is not participating in this rally.  I focus on Price and Volume as a way of “telling” me where the market may be headed.  I would not be surprised if the market “pulled the rug” out from under us.  If the “rug” gets “pulled” I would expect the market to drag the majority of stocks down with it as we seek to find another “bottom”.  The market has been in a down-trend (series of declining price peaks) since 10/3/18 and we are approaching the down-trend line.  However, I believe the 2600 level on the S&P 500 is the more important level of “resistance” that the market may need to overcome IF we are to head higher.  The 2600 level on the S&P is where the 10/29/18 bottom formed.  This is a significant level of resistance because it is likely fraught with sellers (who bought at that level) looking to get out and simply “break even”.  We could “constructively” trade “sideways” to consolidate the recent gains and decrease the selling pressure and that could be a good sign.  However, the odds favor a continuation of trend which has been down.  I believe the market will trend lower until a “catalyst” convinces buyers that it is “safe” to come back in the “water”.  Keep your “Watch List” current and study the charts because “a picture is worth a thousand words”!

What “catalyst” could turn the market higher?  I believe that a Trump-China Trade Deal before the March 1st deadline or a resolution to the record-setting government shutdown could turn the market higher.  And then there’s the Fed Rate Decision on January 30. Investors are rightly concerned that a pro-longed Trade War would likely not be good for corporate earnings/stock prices therefor demand for stocks has been “light” as seen in the daily volume numbers.  If the Fed were to indicate that they may lower rates or slow their bond selling in their bloated $trillion balance sheet, then the market may be able to put in a firm bottom.  It is sad but I think that market is “hooked” on the “Fed’s liquidity injections” and I believe the eventual “detoxing” period could likely be very painful to those who are not looking “behind the curtain”.  I believe that the worst thing we can do is not be prepared for what is inevitable.  Please do not stick your head in the sand and buy into the lies of Wall Street that “the market always comes back”.  Yes, it has always “come back” but there no guarantees that it always will.  Don’t forget that we are in “earnings season” where companies report their quarterly earnings and give “guidance” into the next quarter.

Pot stocks (the weed patch) appear to be Hot!  There has been a recent run-up in the Cannabis (pot) stocks (TLRY, CGC, CRON and ACB) lately as they seem to be on fire!  Maybe this is a sign that “risk” is coming “back on” as money flows into the “speculative” area of the market.  Another encouraging sign is that the Floating Rate and Junk Bond markets have rallied strongly off the Christmas Eve lows with the Indexes.  I believe the Floating Rates and Junks that have come “straight up off the bottom” and are now due for some consolidation to digest their recent gains.

All of my investable assets are in LIONX, so I have plenty of incentive!  I designed LIONX as a way for you to gain access to my 28-years of successfully managing money.  I will always do my best to “manage risk and grow” the assets in LIONX.  I never “buy and hold” anything because there are no “guarantees” in the market.  When the majority is convinced that this or that investment is a “no-brainer” then it may be time to look for an exit.  I am an “opportunist” with a “flexible” investment strategy that allows me to invest in any investment class domestic or foreign.  Historically, the majority of my gains have come from trading “in and out” of Junk Bonds.  However, the market is constantly changing so I try to adapt and profit during any given market cycle.  I simply try to invest in areas that offer the best “risk-adjusted” returns.  Risk-adjusted returns measures how much risk is involved in producing the return I am seeking.  I simply manage the risk I can control and let the market determine the return.  During periods of perceived low-risk, I have the ability to get fully-invested and leveraged and during periods of higher-risk I tend to be more cautious.  I am simply using the Wisdom and common sense that God has given me to stay invested in the up-trends and avoid the life-changing down-trends.       

LIONX finished 2018 up 2.41% with a Maximum Draw Down (MDD) of only 4.43% while the S&P 500 Index finished 2018 down 4.38% with an MDD of 19.36%! 

Click here for my latest LIONX Fact Sheet

See where MorningStar has placed the Issachar Fund in the One Year Rankings of the Tactical Allocation Category:

Bottom line: I try to not get hung-up on “labels” (Bear Market, Follow Through-Day, etc.) because the market does not really care what we think or how we “label” it.  The market will do what it needs to do regardless of what we think it should do.  I study Price and Volume charts of Leading Stocks in real-time because I believe “Leaders” will “lead” the Indexes that most investors follow.   Trying to predict what will happen in the future that does not yet exist is somewhat futile.  Yes, it is okay to have an opinion about where we are headed but I try to remain humble and have a teachable Spirit.  I try to focus on the bottom line every day and take steps to manage risk then grow the assets in LIONX.  Remember, no one cares about your money like you do!  If you like or dis-like what you have been reading, please let me know, especially how I might improve.

(Portfolio holdings are subject to change at any time and should not be considered investment advice. There is no guarantee that any investment will achieve its objectives, generate positive returns or avoid losses.) 

Health Tip:
Studies show that people who eat the most fish have a lower risk of all sorts of diseases, including heart disease, dementia and depression.

Inspirational Quote:
The difference between something good and something great is attention to detail.

Verse of the Day:
May the God of hope fill you with all joy and peace as you trust in him, so that you may overflow with hope by the power of the Holy Spirit. Romans 15:13

The chart below shows the net return for the last 12-months of LIONX (red) verses S&P 500 (green).  Notice how LIONX is far less volatile and has performed better than the S&P 500 Index below.  I believe that managing risk is the key to long-term success.  Pictures are better than 1,000 words! Past performance is no guarantee of future results.

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Dexter Lyons