This Monday morning (November 29), I expect the market to rally. The market will probably even rally into year-end 2021.
But – But breath is weakening in the growth-end of the market. Value is still attracting the attention of fund flows. Commodities especially energy are attracting fund flows. We sent out a comment by Bank of America that Emerging Markets could be the best performing asset class in 2022. Blockchain is where the rapid growth with high profit margins are, and we think this group will attract funds low. So, we think 2022 will be an interesting year because there is now expectation of rising interest rates- even if slightly rising. Discounted cash flows and earnings will be recalculated. This will impact the story stocks without positive cash lows.
Here is a suggestion to consider.
*Add some short-the-market ETFs to your holdings.
The biggest complaint we all have is at a market bottom – we don’t have cash to “Buy low/sell Higher.” We are in the market; our prices are crunched, and we have no cash or worse we have to sell for margin call needs.
Two possible answers to this problem. The first is begin buying some market inverse ETFs. They gain value as the market falls so at the bottom or what we think is the bottom we have something to sell for cash to buy into the lows. The second possibility is to know what your core stocks and that are opportunistic stock holding. So, if you have five core positions and five opportunistic positions you can sell the opportunistic positions and add purchases to the core positions. You have shrunk your position holdings from ten positions to five or six positions. At the moment I am thinking February, March and April could be a correction for the market or perhaps a continued rotation out of Low/profit High growth sector of the market into Blockchain – Emerging Market or Commodity related positions.
Two inverse ETFs are structured for being short-the-market hedge.
Dorsey Wright Short ETF (DWSH)* and AdvisorShares Active Bear ETF (HDGE)*.
Both of these funds seek weaker sectors of the market to be short. They short stocks rather than using futures to be short-the-market. This eliminates the time decay of value, futures have in rolling expiring contract dates forward.
The last two charts below use futures to short the market so are better suited to traders than hedging. They are interesting tools but like any tool, best if used as designed to be most effective. RMW (Short the Russell 2000) and SQQQ (short the NASDAQ 100) – both built for traders.
If you are longer-term and hedging rather than trading, you might start accumulating DWSH and HDGE into your holdings.
If you are shorter-term and trading, you might begin trading the short side of the market with SQQQ and RWM.
Hope these are helpful thoughts for the day. Good fortune to all of us.
As always look for counter trend moves to accumulate and with the trend spike moves to sell into. Best to scale in and scale out Vs all or none trades.
Written November 27, 2021, by Tom Linzmeier, editor, LivingOffTheMarket.com
Building Wealth – one day at a time.
Available for Coaching, Training or Mentorships
Contact Tom through the LOTM website or by email
Rate: $150 per hour / Monthly Retainer, Lowers Rate
LOTM Research & Consulting Service
* An account related to LOTM holds a position in this security.
Neither LOTM nor Tom Linzmeier is a Registered Investment Advisor.
Please refer to our web site for full disclosure at www.LivingOffTheMarket.com ZTA Capital Group, Inc.
To Unsubscribe please select “return” and type Unsubscribe in the subject line.
