“The beginning is the most important part of the work.”Plato

“It is easier to resist at the beginning than at the end.” Leonardo da Vinci

They certainly weren’t talking about the stock market, but those words have meaning today when it comes to what has begun and how investors have reacted.

The majority were in the “resistance” movement at the beginning of the market’s recovery earlier this year. They left one important data point out of their analysis, this is a secular bull market. That has been the message here for over seven years now. Along the way, there has been plenty of evidence to suggest that viewpoint; the problem was getting people to believe in it. Of course, it isn’t necessary to agree and believe in a principle or specific nomenclature to make money. There are several ways investors can do that if they are following the trend in place.

In simple terms, a secular trend occurs after a market breaks out of long trading ranges that have lasted for years. The subsequent rise also lasts for years. Anyone that wanted to listen to my ramblings back in 2013 realizes that it was fairly easy to identify what was occurring. The S&P 500 broke out of a trading range that held it captive for 13 years. The rest is history, some may believe in my work, and others have fought my theory every week for the last 7+ years.

Sure that trend that I often talk about was “disturbed” a few times along the way. The latest being a “Health Crisis” that turned a global recovery into a global recession. It turned out to be one of the quickest recessions on record. Hence the use of the word “disturbed” when it comes to the primary bull market trend. One of the subtle differences that secular bull markets present is consistent strength. After we observe a total shutdown of the economy then witness a “V” rebound in a relatively short period of time, that exemplifies the use of the word “strength”.

Yes, I know, it is a broken record that is presented here week after week. Do not blame me for the redundancy. I am just the reporter who is telling the story of this market. It just happens that the market continues to send that message week after week. Two weeks ago, the major indices set new all-time highs confirming the continuance of the primary trend. They came back this past week and did it again. Authors, pundits, and some investors far and wide are constantly looking for what is going to send stocks lower. The message here never claimed the road to success and new highs was ever going to be easy. In fact, the brightest bulbs in the box realize that pullbacks and corrections are also part of the scene.

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It is the low voltage bulbs that continually decide to inform the people that have had the most success to “watch out”. The irony of it all is simply amazing to me. So as we look around the landscape what we are left with is not so unusual. Many short-term issues may impact the near-term price action. Those that don’t lose sight of the longer-term macro issues will continue to light the way for those that have continually fallen off the beaten path.

For those who recited the virus statistics to me every week as some sort of warning sign and their market strategy, please allow me to return the favor and mention what is important. The equity market statistics for November 2020:

– Dow up 13%, passes 30k, the best month since 1987

– Russell 2000 up 20%, best month EVER

– S&P energy up 37%, best month EVER

– S&P financials up 19%, the best month since 2009

– S&P industrials up 18%, best month EVER

With these new highs, the naysayers are salivating waiting to tell everyone that the next major move for the equity market is down. The very best of luck to those that continue to fight the message.

This past Monday represented the third straight week that investors were waking up to positive news related to vaccines. The consolidation phase that started in the prior week continued. Back and forth action that was resolved to the upside. The S&P closed up 0.61%, and all of the other major indices followed. Dow Transports and Russell Small Caps remained on fire with respective gains of 1.5% and 1.85% on the day. You guessed it, the NASDAQ lagged gaining just 0.22%.

All of the major indices were now in sync. The S&P (+1.6%), Dow 30 (+1.4%), Dow transports (+2.2%), and the Russell 2000 (+1.9%) all set new highs. It was more of the “reopening” trade although the NASDAQ added 1.3% as well and sat just 20 points from another all-time high. Energy, Financials, and Materials led the way. Other than many indices being overbought, this across-the-board strength is hard to find fault with.

The remainder of the shortened trading week saw the indices meander around the new highs while the NASDAQ snuck up on investors and made another hew high for itself on Wednesday. It’s 43rd in 2020. Perhaps traders are ready to rotate back into the mega caps for a few days.

An abbreviated session on Friday saw the S&P, Nasdaq, and the Russell 2000 all post new all-time highs. No sector is being left out as all of the major indices posted gains for the week. The across the board strength continues with the S&P now up 12+% for the year.


Q3 GDP growth was left unrevised at 33.1% from the Advance report. Growth has bounced back at a historic pace after cratering at a record -31.4% rate in Q2.

The Atlanta Fed tracker of current growth rose again to 5.6% for the October-December period and may climb yet higher on the housing news. Led by manufacturing, industrial production expanded again last month and Conference Board leading indicators rose for a seventh straight month.

We hear the negatives regarding the many hardships in our COVID-ridden economy 24×7. For sure there are pockets of distress. Concentrating on the negative and ignoring the other data is always a mistake. Successful investors look at the “entire” picture to form a conclusion. In aggregate the consumer enters the Holiday season on a strong footing, the surge in Covid cases aside. Their net worth has jumped $19 trillion since the pandemic low, lifted by rising stock and home prices and a 21% y/y increase in bank deposits. Evercore ISI estimates households have saved roughly $1.3 trillion above trend since March.

The Bloomberg Consumer Comfort Index confirms the positives as it increased the most in nearly two months and the third time in as many weeks to its best level since April.

Consumer confidence was revised slightly lower to 76.9 in the final print for November versus the surprise 4.8 point decline to 77.0 in the preliminary reading from the University of Michigan survey. October’s 81.8 was the best since the 89.1 in March, which had dipped from 101.0 in February. The index sank to 71.8 in April, the lowest since December 2011. All the weakness was centered in the expectations component which declined to 70.5 from October’s 79.2. The current conditions index rose to 87.0 versus 85.9 in October.

Personal income declined -0.7% in October and spending increased by 0.5%. Those follow respective gains of 0.7% and 1.2% in September. This is a sixth straight increase in spending that included a record 8.7% pop in May after a historical -12.7% drop in April.

Consumers are also showing their resilience with the weekly look at “foot traffic”, which is holding steady in the face of the grim virus news. According to Johnson Redbook, chain store U.S. comparable sales rose 2.8% year over year in the week ended November 21 to accelerate slightly from the +1.7% mark in the prior week. November sales are expected to be up 3.8% over the same month from last year.

If these retail data points are holding up, we can expect “online” activity to be even more resilient, showing us the consumer has the ability to spend. All of the “We need stimulus NOW” rhetoric is more of a media talking point than anything else. The data isn’t supportive of that view, and the stock market has ignored all of that “talk” by rallying to new highs.

Chicago Fed National Activity Index was +0.83 in October, up from +0.32 in September. Improvements in production-related indicators (+0.36 vs. -0.1). Employment-related indicators contributed +0.39, up slightly from +0.30 in September and the contribution of the sales, orders, and inventories category increased to +0.08 all contributing to the rise.

Richmond Fed Manufacturing index plunged 14 points to 15 in November after jumping 8 ticks to 29 in October. The index dove 55 points to -54 in April. It was at 1 last November. Yet, it’s a fifth straight month in expansionary territory.

Adjusted for seasonal factors, the IHS Markit Flash U.S. Composite PMI Output Index posted 57.9 in November, up from 56.3 in October. The rate of growth was the sharpest since March 2015, as a steep upturn in service sector activity was accompanied by an accelerated rise in manufacturing production.

  • Flash U.S. Services Business Activity Index at 57.7 (56.9 in October). 68-month high.
  • Flash U.S. Manufacturing PMI at 56.7 (53.4 in October). 74-month high.
  • Flash U.S. Manufacturing Output Index at 58.7 (53.3 in October). 68-month high.

Chris Williamson, Chief Business Economist at IHS Markit:

“The November PMI surveys provide the first post-election snapshot of the US economy, and makes for very encouraging reading, though stronger economic growth is quite literally coming at a price.”

“First the good news: business activity across both manufacturing and services rose in November at the strongest rate since March 2015. The upturn reflected a further strengthening of demand, which in turn encouraged firms to take on staff at a rate not previously seen since the survey began in 2009. ‘However, the surge in demand and hiring has pushed prices and wages higher. Average selling prices for goods and services rose at the fastest rate yet recorded by the survey, with shortages of supplies also more widespread than at any time previously reported.'”

Firms are scrambling for inputs and workers to meet the recent growth of demand, and to meet rising future workloads. Expectations about the year ahead have surged to the most optimistic for over six years, reflecting the combination of a post-election lift to confidence and encouraging news that vaccines may allow a return to more normal business conditions in the not too distant future.”

Analysts expected Initial jobless claims to improve this week. Instead claims came in worse than expected, rising for a second week in a row totaling 778K. That is the highest level in claims since the week of October 16th. On a positive note, this week’s 30K increase was smaller than last week’s 37K uptick.


New home sales were flat falling -0.3% to 999k in October, however, that follows an upward revision to a 0.1% increase to 1.002 M in September, while August was revised higher to 1.001 M from 994k. These are the highest since 2006.

Global Economy


The flash IHS Markit Eurozone Composite PMI slumped from 50.0 in October to 45.1 in November, its lowest since May. With the exceptions of the declines seen in the first two quarters of this year, the average PMI reading of 47.6 in the fourth quarter so far is the lowest since the closing quarter of 2012 (during the region’s debt crisis) and indicative of a steep decline in GDP. Chris Williamson, Chief Business Economist at IHS Markit:

“The eurozone economy has plunged back into a severe decline in November amid renewed efforts to quash the rising tide of COVID-19 infections. The data add to the likelihood that the euro area will see GDP contract again in the fourth quarter. ‘The service sector has once again been the hardest hit, especially consumer-facing and hospitality businesses, though weakened demand has also taken a toll on manufacturing.’ ‘The factory sector nevertheless remains something of a bright spot, with factories in Germany continuing to show especially encouraging resilience, led by a further surge in demand.'”

Revised data on German Q3 GDP was released this week showing faster growth and a different composition from what was expected. Consumption rose 10.8% quarter over quarter, 1.8 percentage points faster than expected, while government spending and capital investment rebounded slower than forecast.

Adjusted for seasonal influences, the IHS Markit / CIPS Flash UK Composite Output Index dropped from 52.1 in October to 47.4 in November and pointed to the sharpest downturn in overall business activity since May. The underperformance of the service economy (45.8) relative to the manufacturing sector (56.3) was the widest in almost 25 years of data collection, reflecting the severe impact on business activity from the second lockdown in England and tightened COVID-19 restrictions across the rest of the UK.

Chris Williamson, Chief Business Economist at IHS Markit:

“A double-dip is indicated by the November survey data, with lockdown measures once again causing business activity to collapse across large swathes of the economy. As expected, hospitality businesses have been the hardest hit, with hotels, bars, restaurants, and other consumer-facing service providers reporting the steepest downturns.”

“Some comfort comes from the data suggesting that the impact of the lockdown has not been as severe as in the spring, and manufacturing has also received a significant boost from inventory building and a surge in exports ahead of the UK’s departure from the EU at the end of the year, providing a fillip for many companies. However, while the lockdown will be temporary, so too will this pre-Brexit boost.”

“The health of the economy in the new year, therefore, remains highly uncertain, but it is very encouraging to see the survey’s gauge of business optimism surge higher in November. Improved prospects for the year ahead are thanks mainly to the news of successful vaccine trials, which at last provides a light at the end of the tunnel for many businesses.”

Profits at Chinese industrial firms surged 28.2% year on year in October to 642.91 billion yuan ($97.79 billion), National Bureau of Statistics (NBS) data showed on Friday, after rising 10.1% in September versus the previous year. That was the biggest monthly profit growth since Jan-Feb 2017.

The Political Scene

During last week, we received reports that President-elect Biden’s nominees for cabinet positions. To date, the list of nominees is considered benign as far as the stock market is concerned. That is except for the announcement that former Fed Chair Janet (The Dove) Yellen would be named Treasury Secretary. According to reports, Fed Governor Lael Brainard will stay at the Fed, likely as a potential replacement for Chair Powell if he chooses to step down when his term ends in 2022.

Yellen’s career as a labor market economist and history as Fed Chair suggest she will be a competent manager of the Treasury apparatus. At the same time, her career as an economist is entirely conventional and there’s little reason to expect anything other than consensus policymaking in her role as Treasury Secretary should she be appointed.

If the early selections are any indication, the Biden administration is going to be dominated by conventional, experienced, and widely accepted technocrats.

Federal reserve 2.jpg

The Fed

The 10-year Treasury rallied to close the week at 0.88.

Source: U.S. Dept. Of The Treasury

There is no problem with the yield curve today. The 2-10 spread was 30 basis points at the start of 2020; it widened from last week’s level standing at 71 basis points today.

Sentiment negative.jpg


Plenty of my internal indicators are showing the overbought condition is coinciding with short-term enthusiasm that is quickly curbed with a pullback or correction.

As crude continues to rally, the price has reached its highest levels since early March and is on pace for its best seventh-best month on record since at least 1986. This week’s EIA data helped to reinforce that strength as crude inventories drew by 0.75 million barrels compared to an expected build of 0.22 million barrels. That build has come even though production has ramped up to its highest level since October 23rd.

Similarly, refinery throughput has continued to rise. Now at 14.26 mm bbls/day, it is at the highest level since late August. Despite that draw and increased production, headed into what would normally be a travel-heavy time of year, gasoline demand continues to weaken falling to the lowest level since June.

The commodity was trading at $45.15 midday on Friday, gaining $2.98 and bringing the two-week gain to $5.00. The last time WTI closed above $45 was on March 5th.

The commodity has broken above its low-$40s resistance and appears ready to move higher. As shown on the chart, false breaks have been common in oil this year, but we can’t assume a false breakout until it occurs.

Higher oil prices should continue to help the Energy sector which has finally shown some life.

The Technical Picture

Three new highs in the last nine trading days for the S&P set the tone for the technical picture being presented. A clear concise short-term uptrend off the October 30th low remains in place.

The breakout at 3,580 is in the rearview mirror, and while it will surely be retested at some point, all major trend lines are rising in a clear Bullish pattern.

No need to guess what may occur; instead it will be important to concentrate on the short-term pivots that are meaningful. However, the Long-Term view, the view from 30,000 feet, is the only way to make successful decisions. These details are available in my daily updates to subscribers.

Short-term views are presented to give market participants a feel for the current situation. It should be noted that strategic investment decisions should NOT be based on any short-term view. These views contain a lot of noise and will lead an investor into whipsaw action that tends to detract from the overall performance.

Another week in the books for this tumultuous year of 2020. The greatest health crisis in 100 years and the Dow 30 has posted a 12,000 point rally off the lows surpassing the 30,000 level for the first time in history. Trying to outguess and “time” the market based on a “feeling” or letting emotion rule your thought process, and you fall into the same trap that bedevils the “average” investor.

The Savvy investor knows what the equity market is about as it is constantly looking for “change”. In this case, the change is “positive”. They also know that after a big run there is ALWAYS a period of “give back”. Just like no one knows how far a rally can go, no one knows when that rally may eventually start to subside. I would not be surprised if the road was bumpy in the coming weeks and months. There are several issues that pundits will now bring attention to in an attempt to give investors a “heads up” as to when this positive sentiment backdrop may change.

Most of these notions will turn out to be worthless commentary. Many will come with an agenda. The successful investor will then have to ferret out what has the potential to become reality and what is simply “talk”. That isn’t so easy. To prove that point all we need to do is go back to March. For sure the virus is “real”. The problem is many took the “HEALTH danger”, jumped to a conclusion, and extrapolated that out to the death of the economy and in the process ignored the positives.

The positives were there right in front of everyone. They showed up very early as the global response to the health crisis was met with plenty of backstopping of economies around the world. Another example came along with July quarterly earnings reports. Investors saw that a large part of the economy was not only surviving but also flourishing. Instead, all of the attention was being paid to the part of the economy that was struggling. The positive rebound in the last quarterly earnings reports continued to show that trend. Technology has taken over the trajectory of the economy.

The myopic views continue as the gurus telling everyone a double-dip recession is at the top of the “worry” list. The culprit in their mind is the worsening COVID issue and the questions revolving around when the “vaccines” may prove to be a true deterrent to the spread. Others cite the lack of stimulus taking the economy back into contraction. This may come as a shock to some, but I’m not ready to join the “double-dip” army. Primarily because I don’t believe they have enough data to back up that outlook. There appears to be a lot of “what if” commentary contained in their “presumptions”. While we may be in for a “pause” in the recovery, none of the economic data points that we see are signs of the “double-dip” recession some are talking about in 2021. I believe that “talk” is a bit premature, and certainly, the stock market by making new all-time highs is NOT predicting that.

Besides what do I do with that “recession assumption” now? Trying to get ahead of a perceived event or market move will usually result in total failure. So it’s time to sit back and watch the scrambling as many will attempt to outguess the stock market once again.

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We can find plenty of pundits, myself included, that say the S&P can easily shed 3-5%, “just because”. A true “correction” after a run like this is NEVER off the table, and there doesn’t have to be a reason for a pullback. It’s how the internal sentiment of the stock market operates. Other technicians will tell you despite some of the near-term virus concerns and “lockdowns” that are being pointed out, we can easily see a 3-5% gain from these levels. I know, more mumbo jumbo, double talk.

Here is the point. A market participant should not be investing or overly concerned about moves of this magnitude given the backdrop that is in place. They should make adjustments to bring more comfort to their situation while giving plenty of thought to the present backdrop for equities.

So far the market has viewed the nominees for key positions in the Biden administration as benign. If this trend continues, that eliminates most of the “transition” angst that was a market overhang.

There is ONE concern that every investor needs to have on their radar screen now. The upcoming Georgia runoff elections for the two Senate seats. Any upset of the notion that we will be working with a “divided government” will change the investing landscape dramatically.

How one decides to prepare themselves for that “possibility” is a decision that only THEY can make. Despite what the geniuses will declare, there is no black and white answer on how to react to a “what if” scenario.

Remember that the consensus view said the stock market risk /reward was slanted to the downside for the better part of 2020. How an investor plays each note in this melody will enhance their success or produce more failure.

Details of how I’m proceeding are laid out in the exclusive Savvy Investor Daily Updates.

Please allow me to take a moment and remind all of the readers of an important issue. I provide investment advice to clients and members of my marketplace service. Each week I strive to provide an investment backdrop that helps investors make their own decisions. In these types of forums, readers bring a host of situations and variables to the table when visiting these articles. Therefore it is impossible to pinpoint what may be right for each situation.

In different circumstances, I can determine each client’s personal situation/requirements and discuss issues with them when needed. That is impossible with readers of these articles. Therefore I will attempt to help form an opinion without crossing the line into specific advice. Please keep that in mind when forming your investment strategy.

Thank you #2.jpg to all of the readers that contribute to this forum to make these articles a better experience for everyone.

Best of Luck to Everyone!

On May 28th when all looked bleak Savvy Investors were greeted with their weekly update;

“The BULL is back. The Long Term Technical view reinforces a Bullish outlook. Economic data appears to have bottomed, the slow rebound has started.”

No, that didn’t come from a soothsayer nor someone that owns a crystal ball. That message was delivered by someone that understands how the stock market works. More importantly, that message was CORRECT and it hasn’t wavered as ALL major indices have again recorded new all-time highs.

Please consider joining, and following someone that continues to have the “story” correct. Lock in a great rate now.

Disclosure: I am/we are long EVERY STOCK/ETF IN THE SAVVY PLAYBOOK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: My portfolios are ALL positioned to take advantage of the bull market with NO hedges in place.

This article contains my views of the equity market, it reflects the strategy and positioning that is comfortable for me.

IT IS NOT A BUY AND HOLD STRATEGY. Of course, it is not suited for everyone, as each individual situation is unique.

Hopefully, it sparks ideas, adds some common sense to the intricate investing process, and makes investors feel calmer, putting them in control.
The opinions rendered here, are just that – opinions – and along with positions can change at any time.

As always I encourage readers to use common sense when it comes to managing any ideas that I decide to share with the community. Nowhere is it implied that any stock should be bought and put away until you die.

Periodic reviews are mandatory to adjust to changes in the macro backdrop that will take place over time. The goal of this article is to help you with your thought process based on the lessons I have learned over the last 35+ years. Although it would be nice, we can’t expect to capture each and every short-term move.