Transcript
Hello, everybody, welcome to Tuesday, the S&P 500 was down just about three quarters of a percent today, all of the indexes were down today, the big story of the day really is these lock downs that are happening in Europe right now, in France and Germany and Italy and Poland, and what have you, they’re starting to add lockdown to continue or what have you. And what’s going on there is that they’re getting a spike in the virus specifically seems to be the variant that came that they call the UK variant, which is quite contagious. And one of the problems for Europe, unfortunately, is that they’re pretty far behind, especially behind Britain behind us in terms of rolling out their vaccine. And so one of the ways that they’re kind of dealing with that is to get people to try to lock down while they get that roll back up and get it going out there.
So unfortunately, that’s affecting the stock market, who’s looking at this and say, okay, maybe the recovery isn’t going to happen as quickly, I actually think the stock market as a whole is wrong, especially here in this country. Right now, gasoline sales are only about 1%, less than they were at their peak prior to the pandemic last year, people are out and about and moving and going, you know, and so I really think you know, here in the US, especially, the vaccine is rolling out, I think it’s going to roll out even faster, multiple states are starting to announce that all adults are eligible to get the vaccine and you know, just a matter of time before we really see some of that happen. Now, the virus is not just a US thing. And so it is important as far as that goes. But I do believe that the market is overreacting here to what’s happening.
So one of the things I talked about, you know, last year, sort of as a new year’s resolution, was making sure that you know, had more courage as an investor. Well, a big part of courage for me comes from knowledge. And so the basics behind what I try to do is to define a theme and really, you know, see if that theme makes any sense. So, to me, a very obvious theme is that the recovery is going to happen here at some point in time, as the vaccine rolls out, there’s always some caveats to that, but that seems very strong. As that happens, we’re gonna see value stocks do well, we’re gonna see bonds do poorly. And so we’ve kind of built the portfolio around that theme. But you can’t just have a theme, you also have to have the trend. So you can have all kinds of things that you think might happen, but they’re just not happening yet. But so we want to look at trends. So let me show you the trend of these particular pieces that we have here. And I’m hoping that this gets you to understand, you know, kind of what we’re going through.
So this is this is a chart here for nine months. Each one of these bars is a week, I like looking at weekly data. This is RPV, which is the Invesco S&P Pure Value Index. So this takes the S&P 500 Index, and takes just the pure value stocks from that index. So you’ll notice on almost all of these cases, they all jumped on the ninth of November. This is when Moderna announced the results from their very positive results from their Phase Three trial. And that meant things could possibly reopen and you’ll see the stars to move this 50 day moving average is one of the things I look at two things I want to see. Is it going up? Yes. Is the price above that? Yes. Those are both good trend indicators. And the here’s the 200 day moving average, is it going up? Yes. Is the 50 day higher? Yes. Okay, those are all important. When the other things I do look at is when things come down, what happens to the volume, so this is the volume. Now this is only for two days so far, but the volume seems to be lower so far on a day by day basis for on the sell side, which is good.
I also look at relative strength. So this blue line shows the strength of this investment versus the S&P 500 which is essentially represented by this red line. And so the blue lines above the red line, it’s outperformed the S&P 500 and you can even see the pattern so it hasn’t outperformed you know in the last week or two. But it’s definitely up Alright, so here’s the next one is just you know, the same thing, but this is the S&P Midcap 400 everything the same jump on the ninth up up down here as you know, relative strength up really, really powerful superstar and trend even though it’s coming down in two weeks here still really, really powerful trend. And here’s the Small Cap S&P 600 Small Cap Pure Value Index. Again, jump above the 50 still comes down a couple weeks. Yes, but everything else is up. This is obviously down but still way up above the S&P 500. Here is leisure and entertainment. So again, jump low volume above. Yes. For the 50, yes, for the 200 well above right here is regional banking, which should do really well. Again, big jump on the ninth above the 50. Yes, it came down a couple of weeks. low volume so far this week.
So you know the S&P 500 relative strength looks great. Okay. So that gives me confidence, I hope it gives you confidence to matter of fact, it tells me you should buy more if you can. And so one of the things we are going to do is do a rebalance here. So I’m going to try to just watch, when I see some bottoming happening, and I’ll do a rebalance on the portfolios as specifically the IRAs, so we don’t have to worry about the, you know, the taxes as far as that goes. But I think the theme is super strong. There’s another key piece of this theme. The one interesting thing about value is that there are less value shares available to purchase than there are growth shares. And there are way less new shares coming on the market for value. I mean, basically, none, matter of fact, they’re shrinking, they’re buying back their stock, they’re merging together.
Whereas on the growth side, there’s constantly new IPOs coming out, and these new things called SPACs, which is another way to go IPO, all of those are more shares coming out on that side, and no new shares over here. So there’s no new supply coming in of any substance. And when that market switches back around, and we get past this concept of this variant scaring everybody, which I think will happen here, you know, in a short period of time, we should see some really strong, you know, money come into these recovery play. So anyway, that’s, that’s what I see. Theme, very important, very strong trend also has to go together with the theme has to be strong. If the trend breaks down, we’re out of there. That’s what happened with clean energy trend broke down. A lot of the Clean Energy stuff was down huge today.
And so really, you know, we’ve got both going our direction. I know it doesn’t seem like it, it seems painful to watch what’s happening here day by day, and the last couple of weeks, but hang in there. This is going to be a period of time where we can actually take advantage of this. So look forward to seeing what’s gonna happen tomorrow. Thank you very much.