HI Again,
We just reached the half-way mark for 2021; and the market had the best first half since 1998!! In February and March, our portfolio gained 29%. For months, all market analysts have been worried about what inflation would do to the market. As I stated in a previous newsletter, a technical analyst predicted that inflation will not be a threat and commodity prices such as lumber will peak. That turned out to be true. As Jim Cramer states, billionaires want the Federal Reserve to raise rates so there will be no wage inflation and then they can multiply their billions but the Federal Reserve is more concerned about the 80%+ who are wage earners with no or a few assets.
XLE, the Energy ETF gained 44%. Per Josh Brown, when there is a significant gain over a short period of time, it is a red flag and most probably it is a rally in a bear market. Energy is good for trading and not for long term investing. As the price goes up, production too will go up. While many people assume Saudi Arabia is the world's largest oil producer, that's no longer the case. In 2017, the United States came out on top as the leading global producer of oil and other petroleum liquids. Overall, oil companies in the U.S. pumped out an average of 14.5 million barrels per day (BPD), according to the Energy Information Administration (EIA). That production level accounted for 15% of the world's total output that year, which was ahead of both Saudi Arabia (at 13%) and Russia (at 12%). (DiLailo, The Motley Fool, 8/28/19). In order to combat global warming, all economies are moving away from fossil oils. That is not good for this industry.
On 6/18/21, the technical analyst, Carter Wright, made the following comments on CNBC:
· S&P 500 could decline by 7.8% in the near future.
· XLF or the ETF for Financials could go down by another 18%
· One should consider selling banks and financials.
Last month for the first time, a head of a state/country made Bitcoin legal tender. Who did that? President of El Salvador! The International Monetary Fund (IMF) made an immediate announcement that they were disappointed with El Salvador. This is the very reason why all developed countries should ban Bitcoins and cryptos. Biden administration just announced $4Billion in aid to countries such as El Salvador. Most foreign aid ends up in the bank accounts of corrupt politicians in those countries. Now they will end up in Bitcoins. As Bitcoins go up in value, ransomware hacking is increasing exponentially. During the past 4 weeks, China started cracking up on Bitcoins and Cryptos. We should do the same in the US. According to Barron’s 14% of Bircoin account holders control the price of Bitcoins. Recent JP Morgan survey shows that 49% of people consider Bitcoins and Cryptos to be “rat poison”.
Tom De Mark is the founder of De Mark Analytics; It can be applied to any time interval, from intra-day, to daily/weekly/monthly. It is said to be more than 70 - 90% accurate, whereas most technical analysis indicators are less than 50% accurate. On 6/11/21, Tom De Mark made the following observations
· Bitcoin is close to a bottom as it has lost more than 50% from its previous high
· In the future, Bitcoin can recover 50% of its previous losses.
· Previously he accurately predicted that Bitcoin will peak around 4/13/21
· Not yet (as of 6/11/21) at a bottom (with respect to Bitcoins)
· Bitcoins will bottom prior to 7/5/21 so he asked people to be ready to buy
· S&P 500 has run out of steam and will peak soon around 4335-maybe before 6/18/21 (That did not happen as it ended at 4352 on 7/2/21!)
It seems like (as of 7/5/21), Bit coin made a “double bottom” on 6/20/21 and 6/24/21. Double bottoms are very bullish but if this will hold or not is yet to be seen. Personally, I am not that bullish on Bitcoins in the short term.
All investors know that when insiders buy their own stock, it is a very bullish sign. Years ago, when banking stocks and all stocks were in a bear market, the CEO of JP Morgan, Jamie Dimon purchased millions of his own company stock and that put an end to the market slide. The opposite is also true. Recently, the well-known former CEO (and current Exec Chairman) of Disney, Bob Iger sold 50% of his shares in Disney (per CNBC)- Iger, 70, disposed of 550,570 shares at an average price of $179.21 on June 1, according to a regulatory filing Thursday. The move cut the shares he owns directly by 50% to 555,865. (Nick Turner,Bloomberg,6/3/21)
To me, that is alarming. On 3/1/21, Disney topped at $201. Over the past 3 months, it made a triple top at around $177 to $179. These signs are not encouraging.
Last time Apple made a high was around 1/25/21 at $ 143. This is the mostly held stock with a market cap of $2.33 Trillion. Directly or indirectly through ETFs, most investors own Apple. It has been a great disappointment for a long time. For the past few months, analysts were waiting for Apple to go over $135 so that it could start another bull run. On 6/8/21, at $126, the 5 day moving average overtook the 13 day moving average and the 5-day has been above the 13-day since then so it is very bullish for Apple right now. How long will last? No one knows but I am confident that it will be over $200 by 1/1/2023. If you get to buy Apple below $100, that would be a great buying opportunity. If you get to buy Apple at $50 or below, that would be like buying a lottery ticket that is a sure thing! You can make a 1,000% to a 10,000% profit on Apple call options for sure! People are so afraid of market crashes but they provide us unique once in a lifetime opportunities.
Have a great July!
Fernando