richinvesting posted: " I update each Saturday with my view of the stock market for the next few weeks (if occupied with family or travel, rarely I am a day or two late, just check back). The monthly "Long Term" update will be on the second Wednesday of each month, and th"
I update each Saturday with my view of the stock market for the next few weeks (if occupied with family or travel, rarely I am a day or two late, just check back). The monthly "Long Term" update will be on the second Wednesday of each month, and this supports investors who want to buy and hold, but want to sell to avoid the bulk of a primary bear market, and buy back in for most of the next bull market.
If you lose your bookmark to the blog, google "Rich Investing" and it should show up on the first page or so.
Economy:
Durable goods orders in August were up a strong 1.8%. Initial jobless claims for the prior week were up a bit at 362K, probably attributable to the Covid wave. The final GDP revision for Q2 is +6.7%, about as reported in July. Consumer spending for August was up a strong .8%. The ISM manufacturing index for Sept. is a healthy 61.1 (anything over 50 shows growth). Consumer sentiment index from U. of Michigan for Sept. improved to 72.8.
All of the data looks good, except the small rise in jobless claims over the last three weeks.
Geo-Political:
There is a lot of noise on the news out of Washington, and most of it is hot air. I don't think we'll get a government shutdown because I have never seen one that worked to accomplish anything and they have all been just plain dumb, and worse, in some cases harmful to the economy while being just for show. The last one I remember was the Ted Cruz monumentally stupid shutdown to force Obama to defund Obamacare. That had no chance of success, and I think John Boehner let Cruz try it to shut him up. Cruz failed and while he kept his job, he was not considered a serious candidate for president, which was his objective. https://www.politico.com/story/2013/10/ted-cruz-blasted-by-angry-gop-colleagues-government-shutdown-097753
I predict we will also come up with a budget agreement to allow the US to pay its bills (raise the debt ceiling), because we always do, and it would be a monumentally stupid mistake to let the US fail to pay its bills. Nothing good could from that. However it appears some want to posture and spew hot air before the inevitable.
The $1.1 trillion bipartisan infrastructure bill will get passed, eventually.
The larger "human infrastructure" bill will get passed, after it gets cut down. The dems will have Joe Manchin to thank for saving them from themselves. I think they had to start out big to placate the progressives, but Biden won because he was NOT Bernie Sanders. The majority who elected Biden are MODERATES. The progressives have a very poor negotiating position because the only thing they have to negotiate with is a negative, "not passing" one of the most popular bills in Washington in the last two decades. Repubs and dems both support it, as well as the vast majority of voters. To say we won't pass a great bill if you won't give us what we want is the height of stupidity. Among children, it is called "cutting off your nose to spite your face" and I don't think it will work.
I could be wrong, but I'm probably not. Yet the news channels drone on, 24 hours a day, as though they are reporting the news. You could do it in 30 minutes if you cut the BS.
This government reminds me of stories of ancient Rome, when the politicians "entertained the masses" at the coliseum. Now where are the Christians and those lions????
If you can detect some frustration in my writing, well it's because I'm frustrated.
Technical Analysis:
For the week the S&P 500 was down about 2%.
Technically (see chart below) the market looks poor. RSI at the top of the chart is low neutral at 40. Look at the center line at 50, and you can see we are spending time below 50, where we were usually above 50 for most of the last year. Momentum shown by MACD at the bottom of the chart is strongly negative. The price action is negative.
There is only one thing that is always true about a correction. Once a correction starts, NOBODY can tell you the magnitude nor the duration (time) of the correction. We just don't know.
On the plus side, the government has provided a massive cash infusion to the economy over the last 18 months. That usually sloshes around and turns over, helping the economy for a while even after it is halted. The Delta variant wave is receding. More people are getting vaccinated. Merck is close to getting approval on a better treatment in pill form, and it should greatly reduce hospitalizations due to Covid.
On the negative side, the Fed is close to beginning to withdraw extreme accommodation. The market is richly valued which will limit the upside from here.
I made a couple of changes to the chart. I eliminated the Bollinger Bands (they were green squiggly lines around the price action) because I did not find them useful. I added a new 150-day moving average (the green line just above the red 200-day moving average). It is another potential "support level".
What am I doing? I bought GTEK last week and mentioned it, with a 5% trailing stop loss under the ETF. I was stopped out this week with a 5% loss on a small investment that I made, so I took a chance, but I was not materially hurt. When taking a chance, I use a small amount of money. I bought small amounts of LMT, PFE, and AMZN. I have been selling far out of the money Puts on stocks I would like to own at lower prices. Why am I selling far out of the money puts? There is no telling how far down this correction could go, and I don't want to overpay for stocks. If stock prices stop going down and head up, I can buy back the puts at a lower price than I sold them for, making a small profit and removing any constraint on my money. Then I can buy whatever stock I would like when I think stocks have stopped going down. That's the plan.
I want to point you to an old article by Richard Russell (now deceased). I subscribed to his stock market newsletter for 15 years and learned much from him. Below is his article "Rich Man, Poor Man", where he talks about the different investing styles between the two. There is a lot of wisdom in that article.
I would like to give a shout out to a regular reader and supporter, that is Sebastian! I think Sebastian is my regular reader from Ecuador, possibly, and I am happy to have a reader there. I also have readers in Canada, England, India, Cyprus, and China.
----------------------- If you enjoy these updates, please tell your friends and family who are interested in the stock market about this blog.
I would like to call your attention to a page of my blog called "CLASSICS". It is located at the top of the blog, on the banner just under the title. The banner has links to "Home", "About", and now "Classics". These are articles that I wrote one time for the blog, but they are valuable insights at all times for investors. I will announce in the weekly blog when I add a new classic.
Your comments and questions are always appreciated, so feel free to comment using the "Leave a Comment" feature just under the title of the post.
You can use the hyperlink below the chart of the S&P that will open a larger picture of the chart in a separate window. The reader who suggested this wants to look at the chart side-by-side with the blog text. If you bookmark the link to the chart you can look at it each day of the week to see how the market is progressing to certain milestones. The picture in this post is a static .jpg so it does not update.
I am a retired person and preserving capital and seeking income are important objectives for me. I also want a growth component to my portfolio, while minimizing major risk. My style of investing will not suit everyone. I like to sleep well at night.
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