Founder's Trading Journal
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Navigator Algorithm Models – 100% Invested

As an investment newsletter writer, your vacation can be somewhat comparable to parents monitoring their children still at home with the babysitter. Right now, the kids are making me nervous. Apparently, they are throwing quite the party while dad is away.

In fact, the little bambinos are back to their giddy phase. The dumb money is happy again, and the smart money’s euphoria is rapidly waning.

The Fear & Greed Index confirms the party is on, rising from the scrooge level a month ago back to fairyland.

My favorite fear gauge, the equity put/call ratio, was so low today that I had to stand up and look down my computer screen to find it. It was down there cuddling with the VIX volatility index, and they were both sleeping.

The bottom line is that there is little to no fear in this market, and the party is raging. As all of you well know, I don’t like to be the last one to turn out the lights.

Combine the lack of fear, a rising wedge pattern (mildly bearish), and a minor cycle low due around December 7th, and I am a bit on guard. By the way, a minor low is when you are invested, a major low is when my money is involved. Just kidding, but a minor dip from these levels still isn’t fun. The mean is down around 3580 – so that is a 2.5% to 3.0% downstroke – and that assumes the decline stops at the mean.

In the alternative universe, the upside break of the “W” pattern in the chart above would portend a measured move higher and equal to the pattern legs. But the market would have to jump the border wall here, at the top of the megaphone channel, to make such a move. It seems implausible, but you never want to underestimate a giddy market while the system has so much money sloshing around. As an example catalyst, what if Congress actually tees up their $1 trillion stimulus bill? Apparently, Nancy signed on to the bill late today (tail between her $3 trillion legs). Maybe Mitch will take the pitch? 

That is quite the parabolic move in the money supply (in the chart above). So we could plausibly emigrate over the megaphone border after the forecast “minor” dip, or the market could move up parabolically right from here.

The former is more likely than the latter. While I don’t often share my crystal ball, just this one time, I will let you see the 2021 forecast for the S&P 500 in the form of the gray dotted line below.

The path is fairly certain at this point – but the algorithms can change as the market rolls along. One this is for sure, I would not want to be President around June 2021 – yikes!

I know the charts don’t mean as much to you as they do to me – just follow the gray line. I guess you can see why the wife still thinks I play with coloring books and video games all day. But there is method to my madness. I do slip in a game or two here and there.

So what is the bottom line? If we break the wedge and our 5-EMA stop (currently at 3654), I will likely pull the trigger on a sell signal. We are at an 818% year-to-date return at this writing. My philosophy has always been that it is not about what you make; it is about what you keep. 

One small caveat, my crystal ball is likely to go haywire if we have a constitutional crisis, civil war /or China invades us, etc. That is why we use a disaster stop and keep a few Ak-47’s in the closet. And no Joe and Beto, you can’t have them!

Alrighty then, it is back to vacation. Stay alert for texts/emails over the next 48-hours in case I pull the trigger – on the sell stop that is…

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