Breathe in, Breathe out, Zoom Out

 By the way, there is a huge shift / sector rotation out of “speculative tech” (companies that aren’t profitable) into cyclicals, defensives. One will never know when the stock markets will hit a bottom but it looks likely to have a “mini-capitulation” of another 10% for the S&P500 in late March before recovering sharply. Monetary policy is still very expansive, which long term is good for stocks. Remember, stock markets do not move up in a straight line. They go up and down, higher highs, higher lows. If you are worried by the daily fluctuations, zoom out from daily into weekly charts and you will see a bigger picture.

 

MSCI World ETF. Daily chart. Very noisy. You can see it is vaguely rising. 150 days and 200 days MA rising gently.

 



 

 

MSCI World ETF weekly chart. Looks less noisy. The trend looks up. Now we can see a pattern. 150 and 200 weeks rising. There were 2 chances to buy, in Nov – Dec 2018, when it briefly dipped below the MA. In Feb – Mar 2020, when it drastically dipped. 2 big buying opportunities in 2 years.

 



 

The S&P500 monthly chart shows buying opportunities from 2003 – 2004. 2008 – 2009. Briefly in 2020 March when it dipped below the 50 months MA. When we zoom out for the chart, we will be calmer, be ever ready to buy on dips. The trend has always been up for stocks as money has always been printed.



 

There were 3 stages of the rally from Apr 2020 to now.

 

Stage 1: stay-at-home stocks outperformed. Tech companies like Zoom, Amazon, Alibaba staged a huge rally from Apr 2020 to Feb 2021.

 

Stage 2: Old economy stocks start to recover from Nov 2020 till now. Schlumberger, energy sector, REITs, utilities. Tech also recovered from Nov 20 to Feb 21. There was an overlap of 3 months where both sides recovered but there was a quiet changing of guard. The tech rally lasted 10 months.

 

Stage 3: Speculative tech like Tesla, NIO, falls 20%, QQQ (NASDAQ ETF) corrected 10%. But the old economy stocks continue to rally from Mar 21 onwards.

 

I suspect the old economy rally can last 10 months, from Nov 20 to Sep 21. Does that mean I’m abandoning tech? No. I’ll be buying good companies that will continue to grow as long as they are at 150 / 200 days Mas, e.g. Amazon, Alibaba, Adobe, Salesforce, Merck (our CONVICTION LIST). However, I’ll be increasing my weights into lagging sectors, e.g. energy (Blackrock World Energy), Financials (DBS, UOB, JPMorgan Chase, Bank of America), Materials (Blackrock World Mining). I won’t pick individual stocks for energy and mining, instead, I’ll pick funds to overlay my strategy.

 

Perhaps stage 4, we could see both tech and old economy stocks rally from Sep 21 to July 2022. You’ll never know. Always remember, keep 10 – 20% cash. Buy aggressively on dips especially when they correct to the 150 or 200 days. When something is overstretched, and your cash pile is running low, it doesn’t hurt to take profit. I’ll be buying back some ARK ETFs when they correct another 5 to 10% from current levels, but that’s for me.

 

 

 



 

Comments

  1. Anonymous9 March 2021 at 03:26

    I concur. I have been looking at the same list in stage 3, with 9988 instead of BABA, without energy & mining. Wondering if ARK ETF would be ARKK or ARKF. RW

    ReplyDelete

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