Market Update: 02-25-19

The Issachar Fund (LIONX) is about 95% invested in stocks and Bond ETFs.  LIONX has about 60% in short-term bonds and about 35% in various growth stocks.  This is the most bullish I have been all year!  My conviction level has increased substantially as I see more stocks breaking out of sound base patterns on increased volume.  Volume is the heart-beat of a stock but price is everything.  With price and volume on the rise, this tells me that the “big-money” is in the accumulation phase instead of the distribution phase we witnessed in December.  If my current outlook and positions are rewarded, I may employ some leverage but only if conditions remain or improve.  I believe the market was expecting a recession after the Fed indicated in Q4 that they were on “autopilot” with its balance sheet reduction and raising rates.  I believe the market now does NOT expect the Fed to raise rates and the market is cheering a lower rate environment.  In fact, the CME Fed Futures is indicating that rates will remain the same until January 2020.  As a consequence of lower expected rates, some corporate earnings estimates are being revised substantially upward.  After the disappointing statements from the Fed in Q4, earnings estimates were rapidly being revised downward and the S&P 500 dropped over 19% until bottoming on Christmas Eve.  Since Christmas, the S&P 500 is up over 19% and less than 4% away from an all-time high!

All four major indexes are constructively trading above their respective 200-day moving averages (dma).  I had expected the market to consolidate recent gains along the 200-dma, but it now appears that there may be more “gas left in the tank” possibly to test the October highs.  I do not want to doubt the trend so I will ride it while it lasts.  Remember, the trend can be your best friend!

Prior to this past week, there have been 11 straight weeks of stock mutual fund outflows.  If that outflow reverses and “mom and pop” come back in the market, then we could see more upside.  However, the market is extended and could pull-back at any time, but I would view it as a “technical” buying opportunity unless something fundamental changed.  The US and China Trade talks appear to be going in the right direction because Chinese stocks are in rally mode in anticipation of a favorable deal.  Free and Fair trade would be good for both parties.  I believe that China has more to lose so they should have more incentive to come to an agreement sooner rather than later.

Quantitative Easing (QE) is the “invisible hand” that lifts all boats.  QE is a “force” that is hard to track but I usually know it when I see it, like now.  It appears the Fed is being more “accommodative” with QE and the market appears to love “easy money”.  Keep in mind that when QE is removed or reduced, we might get a sneak peek at who is swimming naked.  I believe one should never throw caution to the wind and never ever buy and hold anything because there are no guarantees in the market.  If something sounds too good to be true, well then it probably is.   

Bottom line:  I believe we had a “correction” in a Bull Market.  I do not believe that we had a top in a Bull Market and the start of a Bear Market.  Bear Markets usually occur in a recession and I do not see one any time soon.  My goal is NOT to beat the market but manage the risk and take what the market gives in return.  I do not try to go from 1st to 4th gear.  I tend to ease in and out of the market as I perceive risk.  I try to manage risk and not eliminate or avoid it.  All of my investable assets are in LIONX so I am All In!  

(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: Harvard University found that patients who were prayed for recovered quicker than those who weren’t, even if they weren’t aware of the prayer.

Inspirational Quote: We all have the power of choice, but every time we make a choice, our choices have power over us.  It Changes US!

Verse of the Day: Walk with the wise and become wise; associate with fools and get in trouble. ­Proverb ­13:20

The chart below shows the net return for the last 12-months of LIONX (red) verses S&P 500 (green).  Note the Return and the Volatility (risk).  I believe that managing risk is the key to long-term success.  Past performance is no guarantee of future results.

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Dexter Lyons