Wall Street experienced a solid rebound on Friday but stocks remain perilously close to a bearish market.
With Europe’s war on terror and surging prices, as well as uncertainty about what the central banks can do to stop it, investors might not see the traditional lazy, hazy summer.
Our call is the president and chief executive at Stock Traders , and portfolio manager at Equity Logic , Thomas H. Kee Jr. who is preparing for what could turn out to be a bullish time for stocks and emphasizes that it’s about understanding volatile times.
Kee said he sees a shift coming, though not one where investors can “buy and hold for the next 10 years.
This is called a market oscillation. Markets drop hard in volatile times. Then they rise again. Stocks are “ripe for recovery” as they have fallen hard.
What that means is volatility. He said that volatility is a normal part of market conditions. “It’s not what people are used to because stimulus has been a component since most people have been in the market nowadays, especially all the new [investors].” Pre 2010, markets were naturally volatile, he reminded us.
But, the ECB continues to buy aggressively and the Fed still hasn’t reduced its balance sheet, he stated, indicating that the fabricated demand remains.
While market volatility has made some investors nervous and panicky, Kee stated that he wasn’t seeing any signs of an immediate crash risk based on his Evitar Corte Model which uses FOMC money policy to determine market crash risk.
What should investors do with this information? Kee has long been a fan of index ETF strategies, and suggested investors do the same, only buying or selling index ETFs — he prefers the highly liquid SPDR S&P 500 ETF Trust
Investors with multiple stocks in their portfolios will need to take longer to manage risk, he cautioned.
Since 2000, an investor putting money only in the S&P 500 ETF
and cash, moving to cash when his crash indicator was warning of high risk, but all other times investing in the S&P 500 ETF, would be beating the market by 530%, said Kee.
Kee stated that there are two types: retail investors who want to trade or those who simply want to keep their investments. They should not be concerned about how to protect their portfolio. Instead, they should focus on the market crash model that will tell them when it’s coming and make their portfolio more agile. The other investor who likes to trade just needs to look at daily or weekly pivot points for the S&P 500.
Investing in SPY right now is better than investing cash, but cash last December was a better investment, he stated.
Kee said that their Fibonacci calculator just triggered a buy for the S&P 500 at 3,884. “This calculator is adapted for the stock market, based on mathematical formulas that are governed by human emotion, and without stimulus that is exactly w