Morning Note: Not Over-Thinking It Right Here — And — “Sitting Tight” is Fine, When…

COVID scares notwithstanding, per our latest technical analysis (recent videos), stocks have been looking heavy for quite some time. 

And while this morning’s, and last week’s downward volatility may seem unusual, actually, what’s been unusual is the lack of any serious corrective action, given extended valuations, debt setups, geopolitics, bad breadth, and so on.

I’ll follow up via video with a quick macro update and more on present market conditions a little later today. 

In the meantime, the following from last week’s main message I think in a nutshell puts present action in its proper perspective:

“So, bottom line, should we trust that all is well now that there are literally no holds barred when it comes to market intervention? Well, depends on how you define “well”. Short-term, sure, there’s no reason at this juncture to believe that there’s not another buying opportunity potentially in the offing (although I’m talking a 20%, not a 2%, dip). Longer-term, well, the misallocation of resources that result from such top-down “control” of economies and financial markets is a whole different conversation altogether.”

“There’s thinking, then there’s thinking (over-thinking) when we’re talking investing. The latter can be the result of living emotionally with the short-term fluctuations of markets. And, as you might imagine — per Jesse Livermore’s admonition to sit tight when you’ve done the macro work — that (reacting to over-thinking) can result in consequentially negative (longer-term) outcomes.”


“…the upward pressure on select commodities — over the long-term from here — in all likelihood isn’t going anywhere. But, absolutely, there will be volatility along the way.”

“As clients and regular readers have noticed, we remain bullish (long-term) on energy — and I’m not talking just renewables right here.

In a nutshell, fossil fuel markets have seen massive capital expenditure reduction of late — with the expectation of more cuts to come. I.e., we’re talking less capacity to produce to an extent that we think massively overcompensates for the go-forward reduction in demand due to the adoption in renewables.

So, again, intermediate to long-term, we want to be in that space. In the short-run, however, we see heightened risk potentially coming from a sharp increase in global covid cases and/or potentially serious riffs within OPEC.”

Asian equities got hammered overnight, with all 16 of the markets we track closing lower.

Europe is equally a mess so far this morning, with stocks down across the board.

U.S. major averages are for sure taking a hit to start the week: Dow down 507 points (1.47%), SP500 down 1.36%, SP500 Equal Weight down 1.35%, Nasdaq 100 down 1.23%, Nasdaq Comp down 1.46%, Russell 2000 down 1.82%.

The VIX (SP500 implied volatility) is up 17.45%. VXN (Nasdaq i.v.) is up 14.43%.

Oil futures are down 4.32%, gold’s up 0.04%, silver’s down 1.37%, copper futures are down 2.235 and the ag complex is down 0.16%.

The 10-year treasury is up (yield down) and the dollar is flat.

Led by utilities stocks and gold (our only two positions in the green at the moment), but dragged by MP (rare earth miner), ALB (lithium miner), URNM (uranium miner), oil services stocks and metals miners, our core portfolio is off 1.00% to start the session.

I concur with Jesse Livermore’s call for patience, but only when the macro work’s been (being) done and, therefore, the investor is sitting tight on a fundamentally sound, diversified portfolio:

“The reason is that a man may see straight and clearly and yet become impatient or doubtful when the market takes its time about doing as he figured it must do. That is why so many men in Wall Street, who are not at all in the sucker class, not even in the third grade, nevertheless lose money. The market does not beat them. They beat themselves, because though they have brains they cannot sit tight.”

Have a great day!


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