Safe to Get Long?

As of July 27, 2022, the BCC still shows zero. Do you think it’s time to establish a long position, or is it advisable to still remain on the sidelines? At the moment, I am experiencing a bit of FOMO (fear of missing out).

I guess the question is, long what?

As is always the case, some stuff is insanely priced and some stuff seems pretty attractively priced.
Those who get long the first stuff are likely to regret it more than the folks who buy the second stuff.

That being said, the number of things in each category probably isn’t equal.
I probably wouldn’t buy the S&P 500 at this juncture, but that’s just me.

Jim

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The SOS Jim suggested back in April- of high rev growth per share and high ROE, within top 1/3 of close to 52w highs - has done pretty well in the last couple of months. At least my top 8 implementation has. Obviously mostly driven by market bottoming activity lately, but still a pleasant start.

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I am in the opposite situation: I use a version of BCC with a longer look-back. Thus I have sat thru the draw-down up to now. Unless the signal gets rescued by the recovery of NHNL, my version of BCC going to go to zero pretty soon. At that point I will definitely sell the portion of my portfolio that is subject to the BCC rule.

I adhere to the wisdom of Kevin Kostner, in Bull Durham: Don’t think. It can only hurt the ball club.

Baltassar

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On pricing, we have (data from barchart.com):

SPY p/e ttm 16.11
RSP p/e ttm 19.72

QQQ p/e ttm 28.00
QQQE p/e ttm 32.44

IWM p/e 11.74

The Russell 2000 appears to be the most cheaply priced of these three indices.

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Jim,
Probably not the best way to phrase this question, but I know your major bottom indicator never signaled in 2022 so far, but my question is: Does it need to?

Is there some sort of historical framework for seeing X amount of minor bottom signals without eventually having a major signal relatively in the same timeframe.

I am of the opinion that we are in a Bear Market rally, and it may keep going and plenty of folks will get FOMO and then the rug gets pulled and we retest the mid-June lows at least once more.

So I am happily fishing for data-focused reasoning that backs up my gut, so that I can be blissfully biased towards it and make myself feel better for staying in cash (for now).

Enjoy the weekend,
Dreamer

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Probably not the best way to phrase this question, but I know your major bottom indicator never signaled in 2022 so far, but my question is: Does it need to?

Well, first, it came so close it might as well have.
In effect, each day my model creates a metric of how “bottom like” today is.
If it’s a very extreme number I call it a major bottom, and if it’s strong but not that strong I call it a short term bottom.
The signal on 2022-05-12 was the strongest possible short term signal, and almost a major bottom signal.
Very borderline. Had I tuned the system even slightly differently it would have been.
But I specifically tuned it to give major bottom signals only very rarely.
(of course, May 12 wasn’t the low…the model was not as convinced at the lower mid June low)

I am of the opinion that we are in a Bear Market rally, and it may keep going and plenty of folks
will get FOMO and then the rug gets pulled and we retest the mid-June lows at least once more.

Doesn’t seem like nonsense.
But at some level the market does what the market does.
Same for my model: it is what it is. I watch them both unfold. Sometimes there is a relationship, sometimes not.

But if I had to guess—your bear rally notion has a ring of plausibility.
Given still-high valuation levels, rising interest rates, and the strong likelihood of an imminent recession, my gut feel is that the system was just about right:
A really strong short term bottom seems to have been a good call, but a major market bottom? Perhaps not.

Jim

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Do you think it’s time to establish a long position, or is it advisable to still remain on the sidelines? At the moment, I am experiencing a bit of FOMO (fear of missing out).

Keep in mind the market goes up more than it goes down. Timing is difficult

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The BCC is still sitting at zero. 

The strongest sector at the moment of the S&P500 is utilities. According to [barchart.com](http://barchart.com) data, the percentage of utility stocks above their moving averages is as follows:

  5-day: 100%
 20-day: 100%
 50-day:  97%
100-day:  86%
150-day:  83%
200-day:  90%

That has been a really strong sector. In the last 5 days, 93% of the utility stocks have made new highs, and zero have made new lows.

Second strongest appears to be real estate. In the last 5 days, 94% have made new highs, and zero have made new lows.

Bringing in 3rd are industrials. In the last 5 days, 85% have made new highs, and one made a new low. I think the new low was Stanley Black & Decker (SWK) (bad earnings report with a gap down).