Interim Update Jan 17, 2023

[SOL]

The Dow has traded within that range (34,200 to 34,400), even though it hasn't hit the upper end yet. In general, we have been implementing a strategy of selling only half of our position, intending to buy back at a lower cost and reduce our overall entry price.

We are also monitoring the Market for new investment opportunities, as there are many companies currently trading at highly to insanely oversold levels, so there's ample opportunity out there. However, to maximize returns, we will be selective in our approach. We will only consider extreme entry points on individual stock plays unless a general strong buy, FOAB, or MOAB signal is triggered.

A brief excerpt from the next update.

Historical Monthly chart of the Dow



As Tactical investors, we need to remain open to the possibility of wide-range bound action in the markets for years to come. This market condition presents an excellent opportunity for traders but can be detrimental to passive investors. However, we are not passive players, so we have nothing to fear.

The historical chart of the Dow Jones Industrial Average shows that the Market experienced a period of rangebound action from 1966 to 1982, albeit extremely wide. However, it is essential to note that rangebound activity does not necessarily equate to mediocre returns. Our indicators work very well in such a setup. If you look at the above chart, you can see that they consistently show the ability to identify market bottoms accurately. While market tops can be more challenging to predict, overall, the results have been positive.

In summary, rangebound action can be a trader's dream come true but a passive investor's nightmare. As Tactical Investors, we are well-positioned to take advantage of these conditions and achieve above-average market returns.


How long could this rangebound action last?

In the past, such patterns could lead to ten-plus years of rangebound action. But we operate under different market conditions today. Hence the more likely scenario is 36 to 60 months. One great feature of rangebound action is that Technical analysis tends to work incredibly well. Another thing to keep in mind is that strong companies will continue to put in new all-time highs even if the Indices don't



Short-term market outlook

We are at an inflexion point now, breakout higher or break down. Expect a lot of volatility into options expiration (Jan 20th). If the classic pattern that has been in play for the entire 2022 is at play, then some indices will start to diverge. Some will put in higher 30-60 days highs while others will be lower highs. This could be construed as the first signal that the next downward leg is not too far in the offing.

[MarkD]

I know that period well having lived it in my youth and studied it since I gained interest in market behaviour. Looking forward to the opportunity.

[Yodean]

Yeh ... mentioned previously ...

1966 = 2022, 1967 = 2023 ... not a fan of analogues, but they are fun to consider ...

High official inflation, vietnam/ukraine, equities dipped until respective midterms, rise after, etc.

Of course, exponential A.I. trend could still lead to ATHs ...

[Centeron631]

in 2022 Cathie Woods arkk had a net inflow of about 1.5B but lost ~ 12B for its investors (Astuteshift called this one right on back in March). Imagine if the flow reversed especially as the shareholders' thinking shifts from it will come back to it will never comeback. Could this happen with TI type of stocks ie investors lose hope lose patience (domino levels of patiences) and fly out the door

In the meantime biggies like AAPL, msft, tesla, googl, Amazon and Nasdq recently putting in lower lows or are sitting right at or biting support level (those major stocks will influence the S&P as well) and noone knows for sure if next quarter possibly lower or mediocor earnings have been priced in yet.

But CW fund(s) is not the only ETF with the high roller type of growth stocks in them and if one applies the same thinking over multitude of these hi roller etfs - would not their continued downward spiral in themselves spread like a virus over the individual holders of these stocks and of course growth stock values generally?

[Centeron631]

why does market update Jan 7 state : TQQQ will recoup its losses and then
some, but the same cannot be said of SQQQ, which has lost over 90% since Dec 2018. And yet then goes on to instruct sell half of TQQQ at Dow range.

[Triplethought]

We are at an inflexion point now, breakout higher or break down. Expect a lot of volatility into options expiration (Jan 20th). If the classic pattern that has been in play for the entire 2022 is at play, then some indices will start to diverge. Some will put in higher 30-60 days highs while others will be lower highs. This could be construed as the first signal that the next downward leg is not too far in the offing.

Translation: "Stocks from here will either go higher or go lower". Swell

[SOL]

We are at an inflexion point now, breakout higher or break down. Expect a lot of volatility into options expiration (Jan 20th). If the classic pattern that has been in play for the entire 2022 is at play, then some indices will start to diverge. Some will put in higher 30-60 days highs while others will be lower highs. This could be construed as the first signal that the next downward leg is not too far in the offing.

Translation: "Stocks from here will either go higher or go lower". Swell

Don't forget that's the short-term outlook. Overall we are still expecting one more correction.

[scremonini]

Hello Sol,
does your view on another and potentially final USD rise remain unchanged?
Thank you
Seb

[SOL]

Hello Sol,
does your view on another and potentially final USD rise remain unchanged?
Thank you
Seb

We are still expecting another rally, though the easy part of the trade is over. This move is known as the tail-end move and is generally quite powerful, though it fails 10% of the time. In other words, 10% of the time, the move does not occur, so with a 90% chance of coming to pass, we feel it is worth taking a small amount of risk.

[George1010]

why does market update Jan 7 state : TQQQ will recoup its losses and then
some, but the same cannot be said of SQQQ, which has lost over 90% since Dec 2018. And yet then goes on to instruct sell half of TQQQ at Dow range.

The answer was on the first line of this interim update

We have been implementing a strategy of selling only half of our position, intending to buy back at a lower cost and reduce our overall entry price.

[Yodean]

Translation: "Stocks from here will either go higher or go lower". Swell

You forgot "sideways."

[jonnyfrank]

Translation: "Stocks from here will either go higher or go lower". Swell

You forgot "sideways."

Using the sideways logic simply does not work. Logic would dictate that the odds are on the side of the investor, which they are not. "It can either go up, down, or sideways" implies that there is a greater chance of NOT losing money. It sure would be nice if it all worked that way, but it does not.

[SOL]

Translation: "Stocks from here will either go higher or go lower". Swell

You forgot "sideways."

Using the sideways logic simply does not work. Logic would dictate that the odds are on the side of the investor, which they are not. "It can either go up, down, or sideways" implies that there is a greater chance of NOT losing money. It sure would be nice if it all worked that way, but it does not.

Yodean (I am almost sure, but he can correct me if am wrong) is referring to rangebound action. Rangebound action can be very profitable, especially if the range is wide. In fact, the wider the range the bigger the potential gain. TA works unusually well in rangebound markets

[AstuteShift]

This is great market for neutral advanced option strategies.

Strangles, straddles, reverse iron condors, diagonals trading for any move. I’ve been just using this selective with certain stocks prior to their earnings and cashing out before the earnings.

The win rate is about 60/70% usually. The only flaw is the commissions and market makers not allowing you to load in without jacking up the price of the relative value of the strategy lol.

However, the one thing that’s super good and valuable is you don’t care what direction it goes, as long as the market is volatile.

Remember, you always adapt to the market. You can’t force your will on the market and their is no point in caring.

In reality transurfing, this is called being indifferent to the pendulum. You make it your bitch instead of feeding it your energy.

Volatility is a traders best friend, marriage partner and party bus

[Yodean]

Yodean (I am almost sure, but he can correct me if am wrong) is referring to rangebound action. Rangebound action can be very profitable, especially if the range is wide. In fact, the wider the range the bigger the potential gain. TA works unusually well in rangebound markets

Yep.

Ms. Market hurts the most investors with volatile, wide rangebound action. So first the bears who are expecting "the recession" get smashed as "risk on" takes over for a bit ... then the bears have to cover their shorts, etc., and reluctantly jump aboard the bullish gravy train.

The bulls celebrate as the bears join in as marketes melt up a bit, and once most are convinced there's no "recession," a Dark Swan or some other event "happens," and markets crash down to the bottom of a range, hurting everyone.

And so forth ...