The Dow had its best April in 33 years and then right after the market closed today, it dropped 300 points. I'm glad to be mostly in cash and just nibbling at some stocks that 'seem' to be holding up better than the market. But even these small forays into the market come with more than a modicum of risk.
You already know that I think the market is fooling itself into thinking that a vaccine for COVID-19 is a done-deal and once a vaccine (or equivalent) is found, the economy will be booming again. Since the market is never wrong, it behooves us to at least 'assume' the market is right, but we cannot afford to get lulled into thinking that the only direction for this market is up from here.
In reality, the market could be sitting on a major tipping point. It has retraced a little over 50% from its low of about a month ago; something that is not all that uncommon in garden-variety bear market sell-offs. So, this recent move higher 'could' be nothing more than a bear-market rally and that means, a retest of the low is quite possible.
My plan is to err on the side of caution. I am raising stops again before tomorrow's open (I try to raise them every day), in spite of the sell-off in the after-hours market today. It will not bother me in the least to go into the weekend, sitting on a lot more cash.
We are still nicely beating the market for the year and I want to keep that performance intact. I would like to get all the models up to the performance of the Tactical Growth strategy and even better. If we can get a steadier (much steadier) trend in play, we will make some great headway in increasing net total return. It won't matter to me if that trend is bearish or bullish, as we have the ability to grow capital in either direction... but, we do need a trend that lasts more than a few days.
The key here is staying nimble and having nothing to do with the high-risk buy-and-hold strategies that so many investors and their advisors seem to follow. Do not talk yourself into thinking that stocks are 'on sale' right now. They might be, compared to their early February prices, but there might be a fire sale just around the corner where those same stocks can be picked up for pennies on the dollar.
The goal is to remain opportunistic, but very, very cautious. Now is NOT the time to be taking big chances... so... I am not.
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