COURAGE REQUIRED, LOOK TO BUY IN THE FACE OF WITCHING HOUR TOMFOOLERY

March 22, 2021

The HCM-BuyLine® is positive and any pullback is a buying opportunity. I know I sound like a broken record, and after last week’s selloff some might be a bit nervous. But we do not see it as something to be nervous about. We see last week’s selloff as more to do with a quadruple witching hour playing a role in the stock movements.  A quad witching is the expiration of: (i) single stock options; (ii) single stock futures; (iii) index options; (iv) index futures, and only happens 4 times per year. 

COMPQ (1)

Also, look at the chart above which is the NASDAQ Index and looks to be forming a reverse head and shoulders pattern. This inverse head and shoulders on the Nasdaq is worth following.  Nasdaq is a proxy for Growth stocks, and Growth is 66% of the S&P 500.  If the pattern below plays out, Technology and Growth stocks will soon rally.  This is consistent with our view that Technology made its local bottom a few weeks ago. A further rally in Technology and Growth stocks helps power the S&P 500 towards 4,300, which we believe is possible in the coming months. Even with Technology selling off, we see this a buying opportunity. 

AGG

We are getting a lot of questions on interest rates as they have been rising. And the answer is, we do not know where interest rates are heading. Neither does anyone else, and if they tell you they do, they are just guessing. The Fed has been very clear that a rate hike is not in the cards currently, so this is not the culprit. The culprit is that the world is about to open back up and there is a lot of pent-up demand, and not enough supply, which is causing a short-term spike in inflation.  The bond market is selling off and is down over -3% YTD. As you can see in the chart of AGG (the Aggregate Bond Index), as rates rise, bond prices fall.

Wonder why there is a third wave in Europe? Why is France, which is the size of Texas, shutting down again? Because only 6% of their population has had one shot, and only 3% have had two. Whereas in the US, over 28% of our population has taken at least one shot. They need to get organized and start running this project like a business and not like a government run program. The US has basically let corporate America run the vaccination program here in the US and you can see the difference. 

Current Hospitilizations

Mostly positive news on the American COVID-19 front. 35 states are now near or above 60% combined penetration (vaccines + infections). Are we reaching heard immunity? Yes, in some states.  The key figure is that the combined value is above 60%, which is presumably near herd immunity.  That is, the combined value of infections + vaccinations as % of population is above 60%. You can go to the CDC’s website to gain additional information.

- Currently, 35 states are basically all at this level
- SD, ND and RI are now near or above 80% combined penetration (vaccines + infections)
- So slowly, the US is getting to that threshold of presumable herd immunity.

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