Weekly Update #35: See you in September
First, let me apologize as We´ve been moving back to my home country with my family and did not find time to share the model's update before. I also had a major impact from the Crowstrike update... anyway, I was expecting a correction but completely underestimated its intensity.
Anyway, to prevent such situations from hurting your positions and as we mentioned several times in previous updates, you should ALWAYS use stop loses to and avoid having any winning trade become a loser.
We have gotten an exit/cash signal from a trend model perspective. This shouldn't be surprising with the kind of intense move that's happened. no momentum model would still be long.
Looking forward, things can turn around, but it would be naïve to ignore the price action
Just because we got the sell signal doesn't mean sell everything right away. The move has been so sharp we are likely to get some relief bounce. So use those to derisk if you need to.
5 things caused this downward move
- macro - soft employment print and many other indicators such as SAHM signaled a recession in the US. Coupled with the fact that the Fed didn't cut in their last meeting, many are fearing a hard landing.
- confidence - Warren Buffet selling at record levels and sitting on over 200b in cash. Yes, he sold more than 50% of his Apple shares. These big headlines cause a lot of other funds to sell too. No one wants to be brave and fade Warren. Remember that even if he preaches holding his positions forever, in reality, he does not. He is an amazing market timer
- election odds - Kamala has gained a lot of traction in the last few days causing some nervousness among crypto fans, especially considering how bullish Trump has been on crypto.
- jump capital - less spoken of but one of the big players in crypto jump has been selling a lot. now rumors are they are closing their market-making business and some fear they are getting liquidated.
Given the situation, it's very likely that FED will act sooner rather than later. If you had the power to kick the can down the road, will you do it or will you focus on doing the hard thing?
The FED is no different. However, they can't do these preemptively. If they did they would get a lot of resistance from the opposition (Rep.). They can only act once the situation has got bad enough that way everyone would want them to, and things move a lot faster approval too.
If the FED acts sooner with emergency cuts then we might have a V-shaped reversal. Else and more likely we will have more time and price correction.
Either way, its time to be cautious but optimistic.
See you in the next one!
DISCLAIMER: The No Rainy-Day Portfolio is not registered with any financial regulatory agencies. Content is for research, education, and entertainment purposes and should NOT be considered personalized financial advice