The following post was initially posted to TLS members on May 19, 2020.
Adjusting our strategy based on technical developments.
Yesterday’s monster rally was an investment game-changer….in the near-term. No, not because of the preliminary vaccine results — although, we certainly hope that will be a game-changer for humanity. Rather, technical improvement on several fronts has us shifting our strategy — again, in the near-term. We still believe that the longer-term outlook for equities is dire.
However, as mentioned in today’s DSS, technical chart improvement in several lagging areas is causing a shift in our portfolio construction. Specifically, technical strides in the small-cap and broader market as well as Europe and energy shares now suggests that the recent consolidation is a continuation pattern or bull-flag. Therefore, it opens further upside in the near-term prior to an ultimate top in the post-March “B-wave” bounce.
Because of this development, we are making the following portfolio tweaks, ideally near stated prices (still monitoring):
- Covering European short near VGK ~46
- Buying 5% Oil Services ETF, ticker OIH, near ~109
We are also holding off for now on re-loading any Russell 2000 shorts. That will leave us with shorts in financials and real estate (may cover 1/5 of RE short near IYR ~72.00 to lock in gain), which remain technically challenged but also open to technical improvement should the rest of the market run higher in the near-term.
As always, stay tuned to our DSS posts for further developments — they provide the most current updates to our investment portfolio and outlook. Also, if you know of anyone who’s portfolio has been decimated, or anyone who might benefit from our risk-management, we appreciate any referrals. We will make it worth your while as well. Thank you!
Disclaimer: JLFMI’s actual investment decisions are based on our proprietary models. The conclusions based on the study in this letter may or may not be consistent with JLFMI’s actual investment posture at any given time. Additionally, the commentary provided here is for informational purposes only and should not be taken as a recommendation to invest in any specific securities or according to any specific methodologies. Proper due diligence should be performed before investing in any investment vehicle. There is a risk of loss involved in all investments.