Mike Simonato, Ontario. Presenter: “Investing for the Long Term”, presented to the Feb. 6, 2021 International Online Forum, you can watch by CLICKING HERE.
How is everyone enjoying these markets? As for me, I’ll quote the Pointer Sisters, “I’m so excited and I just can’t hide it”. This is the pullback I’ve been waiting for and this is setting up to be potentially one of the biggest in history. The further it falls, the greater the opportunity for insane profits if played right. Below, I will explain what I’ve been doing (My Strategy, what I’m seeing, and how I’m adapting) Now, let’s look at the markets
All markets are in a C/DN now At this point the Earnings Trend Indicators are either Rising or Stable for the moment. This week will be key with the 2 day Fed meeting as well as key earnings releases so buckle up because it could be interesting to say the least.
USA MTI 45 BSR 13 ETI Rose
DOW JONES: Fell hard this week Selling Vol increasing Definately can fall further
NASDAQ: Below 61.8 retracement Could easily fall to the next support line Selling vol strong
S&P 500: Fell hard this week Could easily fall to support and 50% retracement
MKT TIMING: Could easily continue down to Feb 2021 low Lose 1 yr gain in 2 months Stochastics deeply oversold
READ Views and Strategy
CANADA MTI 63 BSR 17 ETI Rose
PTSE: Support and 200 SMA may offer a cushion
VENTURE: Right at Major Support
MKT TIMING: Right at support but fell hard this week and could fall further
READ Views and Strategy
GOLD Continues to break hearts. One big up day this week and everybody was ready to jump in but once again failed at the 79 SMA RT Ranking rising so watch
EUROPE MTI 96 BSR 79 ETI Rose
MKT TIMING: Fell hard Quite a ways to next support so could easily keep falling
BRITAIN MTI 84 BSR 69
MKT TIMING: Big fall on Friday Bounced off 50% Retracement but easily can fall further
READ Views and Strategy
AUSTRALIA MTI 77 BSR 28
MKT TIMING: Big drop on Friday Holding support for now but could easily fall further
READ Views and Strategy
MY TRADING THESIS.
Here is my thought process and reasonings. NOTE: this may be scary and totally out to lunch.
As some of you know, I was big in sports when I was younger and went quite far ie College and well beyond in a number of sports. Here is what I experienced and witnessed in my sports career and how it applies to trading the markets.
FIRST: This is what is required to succeed in sports:
- Natural Talent
- Strong Work Ethic
- Ability to adapt
- Ability to work well with others
- Strong desire to succeed
Natural Talent. If this isn’t present, you won’t go far. My dad wanted me to follow in his footsteps and be an electrician, however I could never figure out the drawings and after blowing the ends off several screw drivers, it was obvious it wasn’t for me. My uncle was a master carpenter but I couldn’t saw a toothpick in a straight line.
However, I was extremely good at sports and photography. That was my strength and made me nice sums of money. Now I have a window cleaning business that has proved very successful. KEY: Once I found my “Lane” or strength, I flourished and life has been good. It’s the same with trading. I wish I was good at Swing Trading but at this point, I suck. However, when I found my strength – Buy and Hold quality companies, I understand, Life has been very good. Some people will never do good in the market. Others will take time before they figure out what they are good at. If we have Natural Ability that’s Step 1.
Strong Work Ethic. In sports, unless you’re willing to put in long hours practicing, in the gym conditioning etc Natural Talent will only get you so far. I know the hours I spent on the driving range (Golf) in the gym working out etc but it paid off and in a lot of cases protected me from injury (Hockey and Ski Racing) The same is true in trading. Unless you’re willing to put in the long hours figuring out what kind of trader you are and what graph set up works best for you, odds are you won’t do well.
Ability to Adapt. When I stepped up to the tee in golf, I knew exactly where I wanted each shot to land and how I was going to play the next shot in every situation. If you have ever watched golf on TV, things don’t always go according to plan. This is where the ability to adapt comes into play. In golf, I spent countless hours practicing hitting out of sand traps, on the driving range, keeping the ball low (in case of high wind or if in trees ) putting backspin on it so it would “stick” on the green. This way no matter what I was faced with, I could quickly adapt and recover. It’s the same in trading. Hopefully, before we enter a trade we have a plan ie a target profit and a protective stop in case things go south in a hurry. But what if a stock gaps up above your profit target? Do you take the money and run, sell half and let the rest run, or buy tickets to Disneyland thinking it’s going to the moon and you’ll be rich? Your ability to adapt quickly in every situation will help you maximize profits and minimize losses and can be the key to success in the markets.
Ability to work well with others. It doesn’t matter what sport it is, if you can’t work well with others you won’t go far and it will lead to a miserable work environment. Even in golf, which is where you’re out there all alone, it took many coaches, trainers, fellow golfers etc to help you hone your skills. This is extremely important for trading the market. While I have presented many International Forums and I write these essays every week, I’m smart enough to know I’m not all that. I’m incredibly grateful to people like Stan Heller, and incredible mentor and friend, Bob Turnbull, for sharing his amazing strategy, Tom Cauley, Bob Howes, Don Fanstone and many others for their continued help, support and encouragement.
Strong Desire to Succeed. In sports, there is lots of glory and praise but there are days that suck and have you to the point of quitting. It is the ability or desire to succeed that can help get you through these difficult times. This is especially true in trading. You may experience a series of losing trades and if it’s your retirement money, it can really get you down, but a strong desire to succeed can get us to examine what went wrong, consult with our network of fellow traders for guidance, adapt and maybe put on smaller positions until we get back on track. This will help us all succeed in trading.
One thing I learned in my sports career and is even more important in trading was the higher the money involved, the less you will see any type of conscience or common decency. I remember in an NHL training camp a player got hurt, and all they cared about was as long as he was lying there, it was eating up precious practice time. When I was headhunted by Money Managing firms, I’ve been told this on many occasions, conscience has no part in this career. This is even more in play in trading the market. Here are two recent events to highlight this. Peloton executives/ insiders sold $500 Million of stock before it fell hard. USA recently announced they were looking at a “Digital Dollar”. No details of any kind, but Bitcoin fell off a cliff right after. If you think for one second that the big boys and insiders don’t know what’s going to happen before you and I, you are a fool. I know first hand they do and they act long before it hits the market to either profit or protect themselves. That’s why for us, focus on the trend. Look for warning signs and be quick to adapt.
Here is what I’m doing/ have done and my game plan.
I owned Shopify, Amazon and Apple as my Long Term Buy and Holds. I seen that this market was different than the last 10 years. I still own Apple and Amazon as they are well-capitalized and diversified enough to weather the storm, however Shopify was acting hinky and from what I’m seeing, I sold as soon as it dropped below the 200 SMA. (Wise decision as it turned out) With losses last year because of my accident, (Not able to work for the busiest month of the year) as well as the cost of buying a new van, getting it outfitted, and getting screwed by the insurance company, I could bank the profit without taking too big a tax hit.
There are a lot of games being played right now from politicians trying to save their careers, businesses doing whatever it takes to survive, extreme labour unrest where now the biggest lawsuits aren’t from wrongful dismissal but for wrongful resignation. All types of crime especially Cyber Crime is at insane levels (the latest for me was a series of very official-looking emails from Rogers saying if I didn’t upgrade my account I’d lose the ability to email SCAM) In California thieves are stealing all the packages off the trains costing the courier companies millions. Add to that the level of stupid we see. Just this week alone a person with Covid bypassed the Protocols in place because she knew she had Covid and now the place is in lockdown. Two people had Covid but they had planned a Baby Shower with 110 people (wanted the gifts and “The Experience” now everybody is coming down with Covid. I personally know of this level of stupid where people have died so somebody could have their party. Add to this the massive trucker protest this week on both sides of the border. We are already seeing bad earnings and lower guidance from 4th quarter. I’m expecting horrific earnings from Q4! That is why there could be catastrophic downside still to come this year (Again, I could be totally out to lunch) but to me for the first time ever I’m concerned with what I’m seeing.
For me, I’m ready to profit from the rebound whenever it comes. I have what I need to ride out whatever and capital ready to be put to work when the time is right.
I will still be deploying capital in the stocks I’ve been patiently watching all along, I’ll definitely be trading Bob Turnbull’s Strategy and I’ll be doing some of my USA stocks through the CDN CDR’s which have fallen off a cliff.
An example of how I adapt is in my presentation last Feb I said I was waiting for a pullback to the 79 SMA before I would Buy. (I used the 5 yr Weekly Watchlist Average Graph as my guide) Finally last week the pullback I’ve waited a year for happened. However as I said last week I was Not Going to Buy because I seen more downside ahead. What I do at that point is I add the Fib Retracement levels as well as support to try and find combined strong levels of support to watch. As things continue to play out this is what I do:
- Watch VectorVest for Guidance (they said not to ignore the C/DN) How right they were.
- I read the USA, CDN and British views every week (watch Australia as well)
- Pay attention to what I see in day to day ie empty store shelves, businesses closing etc
As always nothing more than my 2 cents and I hope it’s of value and interest