If it’s true that “you’re only as good as your last call”, then I feel pretty good today.

U.S. Stocks

My suggestion on the last week in January to lower your equity exposure anywhere from 50% to 90% (depending on how long one had until needing the capital) looks to have been a wise thought at the moment. I do think the “Parabolic Arc” belief allows for some serious volatility over the next several weeks but as previously noted, much of the gains previously made in that rise are eventually wiped out. What’s best to do now is perhaps the hardest thing for investors to do (and what the financial service industry trains itself to never let its clients end up doing) – STAND PAT AND DO NOTHING!

U.S. BondsThe bull is terminally ill, but its death will be gradual, thanks to capital leaking from equities into bonds and cash still a dirty four-letter word to 99% of the financial services industry.

This statement was made just before the market sell-off. Call me stupid, please. In all seriousness, having tasted “hubris” in my career, I’ve seen so many former “stars” on Wall Street suffer from hubris and end up a “what’s his name” before too-long (No better examples are still Jim Cramer and Dennis Gartman, whose flamboyant styles mask a pretty poor overall track record). And most importantly, Hubris is one of the “Seven Deadly Sins of Finance”.

Gold – The “Battle of the Bulge” for gold bulls remains the $1,365 – $1,400 area. The bear’s last stand to prevent this new mega-bull market from breaking out big-time lies in that zone. The good news is each time it repels the rally, the market makes a higher low. Assuming this will continue, we can pull back to as low as $1,275 and still have no long-term damage inflicted. I suspect that we won’t break below $1,300 and most, if not all the surprises, can be to the upside.

U.S. Dollar – Was deeply oversold and in need of a corrective, counter-trend rally that should be contained in the 91-92 area (and at worse, just below the 200-Day M.A). I suspect that most of the surprises will be to the downside.

Two notes of interest:

  • I’ve spoken about how much the rally in equities has been aided by Algorithm computer trading. Since most go long, no one was concerned with how much computer program trading was occurring (estimates about two-thirds of daily volume). I warned that one-day those computers will flip and when they do, the downside will be faster and far more alarming. I believe we saw a taste of that Monday when the DJIA fell 500 points in a minute or two. What’s also intriguing is what so quickly turned it (I think that John Crudele suggestion is spot-on). It will come as no surprise to yours truly when this famous movie scene becomes real life on Wall Street.
  • Bitcoin (which I believe will eventually be reduced to just a “Bit-of-Coin”) and cryptocurrencies, in general, have had the deep correction that I had envisioned. Where they go from here will have a lot to do with where the equity market heads. If we continue to decline, capital will become tougher to come by and only speed up the great consolidation of that industry as originally thought. One day (but that day is still not on the horizon), the survivors will actually become investments and not crapshoots.

“Where knowledge is wanting, zeal is not good; whoever goes too quickly stumbles.” Proverbs 19:2