Wall Street Next Week: Financial astrology for the successful investor & trade

1. Sell in June?  Sell in August?

Correction odds in June 70% by August 83%

Bear Market by June 52% August 63%

 

WSNW MAY 7 ALERT!  [Past]Time to Prepare for a Stock Market Correction

MARKERS: 5/7/2021 MOC DJI 34714  SPX 4226 NAS 13715

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Given there is bearish Astro later in the month potentially starting as soon as next week, will plan to act accordingly.

There is little REALITY to today's markets – and until a swan event &/or Robinhooders learn trees don't' grow to the sky, pyramid games can continue.

The trigger?

• As Bitcoin collapses (which it will sooner or later) would do it. 
• Another landmine would be TNX à 2 = 20% Nasdaq correction.
• In addition to “I” word inflation, the dreaded “T” word- not the Trillion Dollar infrastructure package but TAXES!!!
• A change in perspective- comparing not to last month or last year, but a longer term horizon leaves little upside to analyst projections.

I am unwilling to buy at today’s prices, especially SPX > 4000: Currently market upside remains limited near term

Outside of day trading and special situations, we plan to sell/short and look to buy if/when markets are 10%-20% lower. 

 

PIVOTS         2020 Close  10%-            Nov 3          

DJI 34750      30606          31581           27480          

SPX 4227       3756             3814             3369            

NAS 13800    12888          12789           11160            

 

BE PREPARED WHEN MARKETS REVERSE

Inflation is now above 4% and I don’t believe it is just “temporary”.

Given market sky high valuations, we do not see sufficient FUNDEMENTALS (Fed accommodation, Vaccines & Stimulus Packages) to justify SP500 earnings.

Our recommendation continues to be maximum portfolio protection.  

 

TSLA, BTC, VIX, GME & TNX are our five market “canaries in the coal mine”:

When three or more canaries sing, be ready to Head for the Hills (&/or your nearest bar) .

TNX:              > 1.50-1.75

TSLA:            < 695-666

VIX:               > 26

BTC:              < 42-30K

GME:*           <50-30

*Gamestop & stocks such as AMC [>5] or COIN [>250] are like Bitcoin, their trading has little or no relationship to reality. 

Short of a reality check that the emperor has NO clothes, newbies learning that all stocks do NOT go UP ALL the time can also time market tops (May/June).

 

TRADERS SHOULD DO QUICK DAY TRADES OR HAVE VERY DEEP POCKETS

• After hard rallies or market drops, it is smart to book profits.
• Current odds of a market leg down starting this coming week is better than 50% and we will continue to short rallies.

 

Commodity Trading:

Gold             Buy on dips Rinse and repeat Latest buy 1870

Silver            Buy on dips

Copper         Watch

Oil                 Watch   

EY DATES:        June 10 13-17 25-28

DJIA:                    S1 34500 S2 34000

SPX:                     4226 PIVOT

NASDAQ:             13800 PIVOT

GOLD:                  1880 PIVOT  R1 1925

SILVER:                26 PIVOT R1 28 R2 30 R3 33

OIL:                       66.90 PIVOT S1 61 R2 68

COPPER:             S1 4.50 S1 4.30 R1 4.80

US 10 Year:          1.58 PIVOT R1 1.75 R2 2 R3 2.20

DXY:                      90 S1 88 R1 92

VIX:                       20 PIVOT R1 22 R2 26 S1 18

BTC:                      38K PIVOT S1 33K S2 30K S3 24K

 

2020 CLOSE:          DJIA 30606 SPX 3756 & NASDAQ 12888

2019 CLOSE:          DJIA 28508 SPX 3231 & NASDAQ 8823  

2018 CLOSE:          DJIA 23327 SPX 2506 & NASDAQ 6635

AFUND Fair Value  GOLD $1822

Reduce Risk and Focus on Capital Preservation:

THINK TRADITIONAL SWISS AND PRESERVE CAPITAL: HEDGE AND PROTECT AGAINST DOWNSIDE RISK.

 

2. Winners and Losers: The Global Economy After COVID

HW: There is a shift in performance away from investments that benefited from the pandemic and lockdowns - such as technology, health care stocks and bonds - to investments that will benefit from a slow but continuing recovery - like resources, industrials, infrastructure, tourism stocks and financials.

Many analysts recommend adding investments that can benefit from higher inflation such energy, gold, TIPS, utilities, Art/Blue Chip collectibles and real estate.

 

Make a list of stocks to buy AFTER a 20% correction.

SELL/STOP STOCKS you wouldn’t buy at current prices, write Covered Calls & reduce margin/raise cash levels.

If this is not upcoming soon, then we will remain highly liquid and wait for the music to stop or Godot to arrive, whichever comes first.

Outside of Special Situations, short term we plan to only VERY selectively add stocks, largely in two of our favorite sectors - metals & mining and entertainment.

 

Favorite H2 2021 Sectors:

Entertainment, Mining & Technology [AFTER a 20% correction if Undervalued & Highly Scalable]

Currently we are also watching some Select Health Care (lower cost/better outcomes, Energy & Distressed Investing for Q3 2021.

Stock selection is important. Whenever possible, we prefer to invest in stocks sporting strong cash flows, sound balance sheets & growing dividends.

Choose your favorite stocks and patiently bid for them.  

 

3. Like it or not, it's 11 o'clock in mining

Given newbie gold and silver investors have scant knowledge of the industry and many are accustomed to Tech valuations, is there an upper limit to Gold or Silver pricing? Maybe not!

When Bitcoin meet reality, it is likely to usher in a rapid source of many new gold investors.

Conservative investors would accept $2200-2300, while more aggressive gold and silver bugs have gold targets of 2500-3000+; silver $35 to $50+.

Silver Fair Value ~ $27 $25 support and $30 overhead resistance.

 

There are many good buys in the precious metal space depending on your time frame & risk/reward desires.

 

Gold: Fundamentally the global political and economic situation is very favorable for precious metals.

Precious metals remain favorite sections. Many generalist investors now have some interest in Metals and Mining.

Also, it is under allocated by most investment programs, this gives it even more potential room to run, especially as inflation fears resurface &/or if US dollar weakens!

Hence, we recommend a full and over weighted precious metals portfolio allocation.

However, we advise long term precious metal investors to also pay attention to stock selection.

Gold remains cheap geopolitical crisis insurance.

For investors who cannot or will not buy the $US currency as well as investors who wish to safely and cheaply hedge their US$ exposure,ONLY GOLD IS AS GOOD AS GOLD!

Once again, someinvestors are hedging record equity prices by buying gold.

Low real interest rates is positive for gold as well as low global bond yields makes gold an attractive alternative risk mitigation hedge.

We expect precious metal stocks to outperform physical gold & silver in 2021.

 

Gold FV $1822 = Commodity FV: 1668 + Currency FV: 1800+ Inflation Metal FV: 1788 + Crisis FV: 2040

INVESTORS: We will stay LONG in H1 2021 both as an investment and as a portfolio hedge.  Despite seasonal trends, we expect gold to largely perform well April on

 

4. JUNE SEASONED SPECULATOR pick: NONE

These high risk/high reward market picks could be potentially very rewarding and/or interesting to watch.

These picks are best for speculative portfolio allocation and often bought in groups of 5 to 10 such stocks.

Remember NOT to ignore their High Risk - meaning use speculative allocation i.e. “money you can afford to lose without altering your life style.”

Always do due diligence before deciding to act. 

 

5. “Canada’s economic fundamentals will remain favorable.”

Simon Harvey, FX market analyst. Monex Canada

HW: I agree.

 

“The writing is on the wall: The Fed’s temporary-inflation mantra is sounding more dated by the week.”

Sal Guatieri, senior economist, BMO Capital Markets

HW: I agree.

 

“The main concern in the markets, rightfully so, is inflation. Data points are beginning to confirm the view that inflation is likely to be more sticky.”

Cliff Hodge, chief investment officer, Cornerstone Wealth

HW: You betcha!