Tuesday, August 25, 2020

Afternoon Note: Can't Know the Future, But Can Know the ......

Asian stocks closed mostly higher overnight; 11 of the 16 markets we track in the green. Europe, however, had a rough go of it today; 15 of the 19 indices we follow closed in the red. U.S. equities were mixed, but definitely (price-wise) with a positive tilt: Dow down 60 points (-0.21%), S&P 500 up 0.36%, Nasdaq up 0.76%, Russell 2000 up 0.32%.

The VIX (SP500 volatility) closed down -1.56%, VXN (Nasdaq vol) closed down 1.84%.

Oil futures are up 1.76% as I type, gold closed up 0.12%, silver up 0.65%, copper futures are up 0.52% and the ag complex (in the aggregate) -- our best-performing component on the day -- closed up 1.47%.

Bonds got hammered today (yields higher), the dollar did as well, -0.30%...

Our core portfolio managed to eke out a 0.11% gain on the session: Ag commodities, emerging markets, base metals, healthcare and silver led the winners, while the bottom five losers, in order, were energy, utilities, materials, the yen and Verizon. In all, 10 of our positions closed higher, 7 lower. The cross-sector correlations today, like so much of the daily market action of late, made little, if any, fundamental sense...

Speaking of making sense (or not), while, as I mentioned above, the S&P 500 Index was up on the day, the majority of its members weren't; decliners numbered 259, advancers 240. While the index is trading way above its technically-relevant 200-day moving average, 41% of its members aren't. While 8% of its members are flashing momentum buy signals (via MACD), 47% of its members are technical sells (signals) by this popular metric. While the index itself hit a new all-time high today, a mere 6% of members closed at one-year highs...

So, as I've been stressing for weeks, the let's call it "really bad breadth" of the market these days smacks of difficult periods past. 

Also, as I've stressed for 36 years, while we can't know the future of financial markets, we can I believe know the risk setup at virtually all times...

Hence, we remain hedged for the time being...

Have a great rest of your day!
Marty


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