December 2020 Video Call

Hello, and welcome to the December video call. I'm glad you are tuning in today. It has been quite an interesting month at least in the political world since we last talked. The financial world, thank goodness, has been pretty calm. So we're going to dive into it today. I'm going to show you kind of where we've been over the last month and more importantly where I think we're heading. And then, of course, at the end, I'll answer some reader questions, usually the favorite part of these calls. So we'll get into it.

Okay. So what are we going to talk about today? If you've tuned into a bunch of these calls, you're going to be pleasantly surprised that I'm not talking about interest rates today. The interest rates story... Rates have ticked up a bit, but it's not as volatile as it has been. Still a leading macro-economic driver for sure, but there's just not a whole lot to talk about with interest rates right now. The 10 year treasury is about 0.9% higher than it's been.

The dollar is falling, on the other hand. That's a bit of a story.

But probably the biggest relief for anybody listening to this call is we don't have to talk about the elections. That's good news. The political uncertainty ... And we'll see this in some of the charts I'm going to show you. The political uncertainty is coming out of the markets. Whether you liked the results of the election or not, they're out of the news, out of the markets. That's good.

Now, stimulus; we've been talking about stimulus ever since the March lows. We've had one package. We've had a few fits and starts on other packages. It seems like I'm say this during every one of these calls. Once again, there's a stimulus bill on the floor. Now this one is for just under a trillion dollars. We'll see where it goes. Not real high hopes for anything right now until the inauguration.

Of course, the markets are at record highs. What does that mean? We're going to talk about that. And then really the big one, volume, volume, volume. I've got a few charts on this. Trading volume is absolutely key on the macro scale and on the individual stock scale. So I'm going to show you some ways on how we can track that, what that means, and really what that means for our profit potential.

And of course, COVID. That's the story of the year. I don't need to tell you about it. It's all over the news. I'm not going to rehash the news. You can do all that, but it is a big variable especially right now as things seem to be ... I can't say whether they're peaking or not, but they're sparking off again for sure. So that's a big part of our investment philosophy, our investment strategy right now. So let's dive into it.

But, first this is a headline that came across this week. You can read it here, "Pizza Hut now accepts Bitcoin, Ethereum in Venezuela." So this is a big story. Bitcoin's at record highs. If you're a Manward Letter reader you know we're playing the crypto space. We're up about 35% or so on our trade there in just over a month. Crypto is really big. And this story kind of shows where a lot of folks think the Bitcoin, the crypto world is heading. So, of course, this is Venezuela. This is not the United States, but Venezuela is certainly the sort of place where we'd want to see Bitcoin gaining some amount. A lot of people say it's a glimpse of the future if we keep going down the path that we're heading on. Which is why Bitcoin is such a popular investment right now.

So with that, and with the popularity of crypto, I'm going to pose a question to you. Do you want to trade more cryptos? So the Alpha Money Flow system works well with crypto. I can go into the crypto markets, see buying pressure, selling pressure and using the same Liberty Indicator that we use for stocks. We can use that for crypto. So let me know if that's something that interests you. I'm kind of excited about testing out some beta trades. They won't be in our actual portfolio, at least not yet, but I can send out some beta trades with Alpha Money Flow. And so that's something that interests you send me an email. Of course, the email address is mailbag@manwardpress.com. I'll have it at the end here. You can see it. Send me an email and let me know your thoughts on that and whether you're interested in getting into crypto and any concerns or confusion you have over that.

So with that chart that we start with almost every month is this is just the S&P 500 over the last few months. Yeah. I got to find my cursor. There we go. You can see here where we're at the top of our KI channels just as we'd expected in late October. We bounced off that lower KI channel, went back up to the top and we're just seeing that nice, steady momentum, rich bound between the mid channel line and upper KI channels. That's quite bullish. That's what we like to see. You can see here a lot of times when we get out of it, we get a good run, but then we dip down. So I'm kind of excited that we're just hanging in here and you can see right now we're above it.

We'll probably come back down. We're losing a bit of momentum over the last week. We'll bounce off this mid channel line. Adding to the bullishness is the Liberty Indicator down here. Just went from red to green. That's usually a good sign of a good long run. You can see that back in July when we went from that quick dip in the red up to the green and really saw some strong momentum. So hopefully this is sustained run. Looking like it should be at least now until politics start really firing back up in late January, early February. So good news there. Is very bullish and everything else seems to back that up right now. So here we're looking at the Fear & Greed Index from CNN. We try to look at this every month. There's some interesting metrics displayed here, but you can see the meter is almost pegged. 92 out of 100 extreme greed. A month ago we saw pretty strong fear indication, but that makes sense. We're heading into the election. A week ago we were greedy and a year ago we were greedy, but a year ago seems it doesn't even matter anymore.

But right now, as you'll see, almost all the metrics are pointing towards the idea that investors are extremely greedy. And I'll get into a little bit not necessarily why that is later, but some contrary indicators that show there might be some false greed, if you will, in the market. And it's kind of interesting. We'll get into it. But here's what the fear and greed indicators are showing us right now. Net new 52-week highs on the New York Stock Exchange. They're above what we've seen most of the year, but not crazy above. So this is just showing us how many companies are hitting highs versus how many are hitting lows. Of course, it's good when that number is ... The higher end of the positive side of things, the better. And it makes sense as company after company is hitting new highs as the indices, the Dow is hitting record highs. It makes sense that this is where it's at. CBOE 5-day average Put/Call Ratio. I've commented on this. This devil horn formation back early in the year.

It's kind of funny, but you can see the Put/Call Ratio just keeps going down and down and down. And what this is telling us is that more calls are selling than put. So if calls are the denominator and that's getting bigger and bigger, the ratio is going to keep coming down. So that's bullish. Investors are using more and more calls expecting the bets on the upside of the market. So that trend is going to keep continuing down as long as things stay bullish and watch for turnaround here. These big spikes to turn into a sustained spike to really see a sentiment turnaround in the future. This was one we've talked about a fair amount, the S&P 500 versus its 125-day moving average. So, of course here, the dark blue line is the S&P 500.

And the light blue is 125-day moving average. Basically the light blue line is just showing us if we combine the market, basically over the last six months of trading days, where things have been. And we know that stocks ... Really anything in nature tends to revert to the mean. So we watch for things like we saw here in early October, where the moving average and the index indexed to converge and the wider the gap, the higher the chances of some sort of convergence. A lot of times the index will come down. And a lot of times it'll flatten out and the moving average will move up to it, but right now you can see momentum is absolutely on its side. I wouldn't be surprised to see some dips. I don't expect things to go back down to 3,500 anytime soon and really slam into that, that moving average, but the really good news here, especially if you're a weary investor, is that there's some really, really strong support here.

And you can see in late October, early November, when we hit that line and it bounced straight back up. We've added even more and more support as time goes on here. So if we do see a dip, I would think that would be a good clue if we hit that line and bounce. We're in pretty good shape if we hit that line and go below it. That gives us some, some warning lights, some bells going off that we got to change our strategy and start to think a little bit differently. Something's going on. Now, I mean, this one is just a compilation of where this fear and greed index has been over time. I think this is important. I don't always get into this one. When we're in the middle here it doesn't mean a whole lot, but you can see we're hitting levels that we haven't seen this year. If you remember we hit some pretty strong record highs.

The last record highs were struck right at the end of last year, the beginning of 2020 when we were at similar levels with the extreme greed that we're at right now. Whether that trend would have been sustained without COVID, I don't know. I have some clues which I'll show you towards the end of my slides here, but I don't think we're going to hit that mark and just naturally bounce lower. There's no real catalyst. As long as the current macro trends that are so powerful remain in force ... Again, you guys have heard me calling for Dow 100,000. It's not necessarily great news. What's happening is far from good to come. The country in true economic terms is having some serious problems. We're on life support, stimulus, zero interest rates.

That's not great for the economy itself, but we can't get that mixed up with stocks and stocks can go to 100,000 on bad news. Remember we got from 7,500 on the Dow and at the bottom in March, 2009 to 30,000 today, and we have not had a strong, robust economy. I don't think the GDP annual figure hit 3% anytime during that period, but stocks have more than tripled. So again, we can do it again on more bad news as long as interest rates stay low and we keep printing more and more money. Okay. So I mentioned the extreme greed side of things and I said there might be some false indicators. Here's an interesting one that's from the folks at Knowledge Leaders Capital. It's just taking the Goldman Sachs Most Shorted Index. So the most shorted index is just a compilation of the stocks that have the most short positions against ... The most people are betting against these stocks.

And so going into the election, we saw a lot of short interest. I showed you there was a lot of fear in the market, but now that the election is over and there weren't riots in the streets, and there's some court battles, but nothing huge. Nothing even like the Florida and the Gore stuff in ... What was that? '00. It's relatively calm. So the stocks that were shorted, we're now seeing what we call a short squeeze. The investors have to close a short position. You have to actually buy the stock. And so that puts buying pressure. That's where the liberty indicator went green. We're seeing that buying pressure in the market. And this is a good reason because there's a lot of that ... The short pressure is coming off. Those guys are forced to buy and push prices up. So it's a bit of a false positive. It can get you in trouble if you don't put enough weight into that equation. That's something to keep an eye on. Again, it could be short-lived. It could be why we're seeing things flatten out here.

In a month or so, I guess almost exactly a month since the election, we're losing that short pressure. So that's something we're going to watch for sure going forward. So this is an interesting thing. Not a whole lot of folks are talking or looking about this. The headlines won't get into the short interest and all that. They'll just say, "Hey, there's good vaccine. News stocks are up." Might not be that. There usually is some other bigger indicator or other mover happening underneath the market. And this is kind of along the same lines. This is interesting. Remember I said, volume, volume, volume. Everything in the market right now is volume. I saw Fidelity. Trading volume on Fidelity right now is almost 100%. It's 97% higher than it was last year. So we're just seeing more investors putting more money into the stock market. And here we're seeing a lot more money go into calls and puts in the stock market. So on the NYSE, call volume was 35% of total volume on the exchange.

That's pretty crazy when you can see the long-term average going back over the last 10 years or so. I mean, if you look over here and compare it to here, just over 10%. And then 2018 we started to rise up and then this year we're really seeing it spike. So two or three times higher than normal for call volume. That's really shown a lot of speculation, a lot of new money going in there. And there's also a lot of hedging going on. A lot of folks are buying calls also because there's a way to buy calls and play the downside risk. They could be shorting and playing calls to protect themselves. So there's a lot of different reasons somebody might buy calls, but overall, when we see call volume rising, we think it's a bullish trend. The put volume isn't rising as high. We're seeing a spike but not to the levels that we're seeing with calls. So again, it tells us there's some more bullishness out there in the market.

So that's really interesting. It's something to keep an eye on, but as I've alluded to a couple of times during this, what I'm really looking at is that big macro trend of 0% interest rates. The threat of negative interest rates really, and definitely negative real interest rates when we add in inflation, but also the amount of money the federal reserve is printing. And that's what this chart shows in kind of a roundabout way. So a lot of folks will talk about the foreign share of ownership and treasury bonds. How much is China or Japan or Germany buying American treasury debt? Again, the headline rumor is that China is financing our debt and they are to a degree, but obviously it's not like it once was. Right now, I think the biggest buyer of U.S. treasury debt is the Federal Reserve. And you can see it here. It is just pulling the foreign ownership down. And that's what this spike is right here. This is the Fed really getting in, but I don't want you to forget that the Federal Reserve has been involved this whole time from 2008.

And this is 2008. And this is when we started printing money. And really when that 12 year bull market got started. So this is really what I'm watching. Is to see this balance in the bond market and what that means to stocks and the lower this goes, the more, I'm absolutely convinced, stocks are going decline and as we get down here, there's 30% and I really hope not below, but that's where that Dow 100,000 is going to come from because all that money has to go somewhere. And it's just creating inflation. The next issue of Manward Letter I'm talking about some of the things that are covering the real inflation that's out there. There's a lot of inflationary pressures, but the typical gauges aren't picking up on it because they're not designed to do it.

But if they were designed to just to look at the valuations of the S&P 500 and compare it to the stocks that make it up, they'd see there's a lot of inflation there. If they look at charts like this, they'd see there's a lot of pent up inflation that's just waiting to be released. And so that's why you got to watch things like this, and really invest ... Use an investment strategy that ties directly into this. I'm sitting here looking at a book A Random Walk Down Wall Street; Malkiel's book. Those ideas. That book's 50 years old. Those books are just not as prominent. They had no idea when they were written that this sort of thing would be happening; what we're looking at on this chart.

Andy Snyder:
They had no idea that this turnaround would happen. So we have to start investing differently. And that's really what I want to drive home. And that's what our services are designed to do. When we look at technical indicators, we look at volume. Again, volume, volume, volume. We look at volume and see what's really going on in the market. And if you look at our track record, it's proving itself. Okay. Enough of me rambling. Let's get into some questions from the readers. I think I have three or four here. So this one going back to crypto. I think crypto is on the verge of something big. Lots, and lots of folks are getting into it. And speaking of volume, to sidetrack just a bit here, if you look at volume and specifically Bitcoin, the last time it was at this price, the volume was three, four or five times higher than it is right now. And so that's an interesting clue that this run is likely more sustained because it's not filled with as much speculation and not filled with ... Just the populist investor getting in there and buying things.

We've seen PayPal, Square, Pizza Hut now getting into it. Big, big money managers are getting into it and turning their thoughts around on Bitcoin. And that's what's really driving it. These guys are getting in there and investing in this, and we're starting to see it get some true legs. So that's why I want to start helping folks invest in it. And why I think watching volume with Bitcoin is so important. So here's the question. You probably already read it. Basically, "How do I set up an account for crypto purchases? Who do I call? Is there a broker out there?"

It says, "Manward gives a lot of good advice, but without the information on how to actually take advantage of this, what do you do?" So my recommendation is Coinbase. If we do the beta trades and Alpha Money Flow, everything I do, every coin I pick I'll make sure that you can go into Coinbase. This is one of the leading brokerages. Super simple to use, trustworthy. You can go on there and make sure you can buy any of these coins. So as far as getting into crypto, it's pretty simple. You click up here and it gets started. And it's just as easy as starting a brokerage account. A lot of people have done it. It doesn't matter you're financial savvy or you're internet savvy. You can go on here and start a brokerage account. So you can't really do it in Fidelity or E-Trade or something like that.

You'll have to go to a platform like Coinbase, but again, it's super simple. So you'll have Fidelity on one hand for your stocks, your options, and then you can go to Coinbase for your crypto investments. Super simple. Okay.

So, "How will Janet Yellen effect the stock market and the 100,000 milestone foreseen?" So that's talking about Dow 100,000. I've kind of talked about that already. I've written a bunch about it, but if you don't know Janet Yellen she used to be the head of the Fed. She tried to raise interest rates and didn't really have any success. Boost them up a bit, but the market did not react well to that idea. And that's really when I think the big pundits came along to our side of thinking and realized that the market's in a trap, the Fed's in a trap.

So she's considered ultra dovish right now. So she's going to be the head of the Treasury and therefore the IRS. And so that's going to be a very interesting relationship between her and Jay Powell and the Treasury. What we're seeing now with the Trump administration, Mnuchin in there, and there's been some fighting especially in the last couple of weeks with the Fed and the Treasury. Some real division. That's going to be gone come mid January. And that's going to make it a lot easier for all this free money to go from thin air out into the market. Yellen and Powell are going to work together closely to make sure that happens. So the chart I showed you about foreign ownership of Treasuries. That line is just going to keep dipping. I don't see Yellen and Powell anytime coming out and saying, "Hey, let's do something about interest rates."

I think they're going to let inflation climb a lot higher than a lot of us are comfortable with. Again, that's something I'm talking about in the upcoming Manward Letter issue and what that means to us and why it could be very painful if we don't invest accordingly. So overall, what does she mean to Dow 100,000? I think she's going to be a leading driver of Dow 100,000. Okay. So next question basically about trailing stops. So we said buy shares of Beat. We're using a 25% trailing stop. What does that mean? I've covered this one a lot. Writing about it a lot.

I have a slide I can just show you to make it easier. So the trailing stop is something that you can essentially put on the trade as soon as you open it. So you own shares of Beat. Now it's time to sell it, but you're not really selling it. You're going to enter a sell order, but as I'll show you here, it won't fill itself. That order won't be filled or won't be entered officially until a certain price hits. And within the case of a 25% trailing stop, that price would have to be 25% below a tie. So let me just show you the mechanics of how to do it. So here we have Beat in the symbol. So we go in, and this is critical right here. You click on sell. You do whatever quantity of shares that you own, and then you get down here and hit trailing stop.

So you'll see market limit all that. And so more probably towards the bottom of the category, especially with E-Trade, I think it's the second from the bottom, you'll see trailing stop. And as soon as you click that, this guy right here will open up and it'll say, "Stop value percentage." And this is where you do 25%. If I recommended 10%, 15% trailing stop, this is where you put it. So again, I said this doesn't get filled right away. As soon as you hit the preview and then confirm the order, you're not going to sell your shares. You're just going to put in this order to sell them when they get below this price. And it has to be good until a certain time. Some brokerages you can allow a stop indefinitely. E-Trade allows I think 60 days, or you can put in a date.

So here I just put in two years from now this trait. So if it doesn't dip 25% below the tie for the next two years, we'll never sell out. This order will cancel itself and we'll own it, and we'll have to enter another trailing stop. But during that time, if the stock dips 25% below its high, then it'll automatically sell. That could be now. That could be December 2021, but again, a trailing stop's pretty easy. Just go into your brokerage platform. And I'm sure you can go in there to search and find the exact instructions on how to do it, but really just go in there and put in a sell order. And when it asks you for the market ... Here it's a price type, but what kind of limit you want to put on. Put in trailing stop, 25% and go from there.

It's pretty simple. Okay. So that's it. And I've probably rambled on a lot. I hope I've helped. If you still have questions, concerns, or even ideas, and especially if you want to do those beta trades, let me know. Drop me an email at mailbag@manwardpress.com. I read everything that comes in there. I can't respond to everything. I can't give anything that even looks like personalized financial advice, but I read everything that comes in there. And if I get enough of a question and I can answer it. I'll do it in one of these calls or I'll do it via an alert or whatever. So keep an eye on your inbox. I've got a couple of plays I'm working on this week. So I will get those out most likely tomorrow. And if not tomorrow, Friday, but probably tomorrow. So keep an eye out.

I'm excited about those. It is a fantastic time to be an investor. There's a ton of free money out there, and there's a lot more coming. Markets are climbing and we've got some great indicators to take advantage of all. So I'm excited. I appreciate joining in. And I guess since this is the last call of the year, Merry Christmas, happy holidays. And I'll officially talk to you next year. I'll keep writing you for the next three weeks or so... but I'll officially talk to you again next year. So thanks.