A Sharpened Focus
Editor’s Note: Due to an unexpected outage at our email service provider yesterday afternoon, we were unable to send our Weekly Issue at its regular time. And with the Comey memo leak creating heightened uncertainty in the market, we decided to send the issue today to give the indicators one day to gather in data and settle in.
The Trump Administration has certainly not lacked controversy, but the market had for the most part just shrugged off the drama as inconsequential distractions. Yesterday, it finally blinked, however, in reaction to the leaked memo written by dismissed former FBI Director James Comey. In the memo, Comey noted that President Trump had asked him to drop the investigation of Russian ties to Michael Flynn—another dismissed official, this one in Trump’s inner circle.
The memo sparked chatter of impeachment, which understandably spooked investors. However, although the market logged its worst one-day performance since last September, the action didn’t really look that bad. Our stock indicator in fact improved to neutral today after yesterday’s market decline. Impeachment still looks like a long shot to us. Furthermore, investors should by now already see that the odds of speedy implementation of economic stimulus promised by Trump is also slim. In other words, even without this latest episode, economic stimulus wasn’t around the corner anyway. If there’s no geopolitical shocks with major economic implications, and the U.S. and Chinese economies avoid pitfalls, the market should avoid a major drop. However, there are plenty of situations worldwide, which is why we kept open the SPDR S&P 500 ETF (SPY) June 220 put for a long time even though our stock indicator had improved.
On Tuesday, however, we decided to reboot the portfolio to sharpen our focus on exclusively using our indicators in Leeb’s Aggressive Trader. We closed out the SPY put and removed the four stocks from our portfolio. Schlumberger (SLB), NovaGold (NG), Gabriel Resources (GBRRF), and Trilogy Metals (TMQ) were vestiges from a long time ago when this service did not base trade decisions on market indicators. While we still like all four stocks as long-term investments, they aren’t great fits if we want to focus more on our indicators, and we already follow them in our sister publications like The Complete Investor and Leeb’s Real World.
Yesterday morning, before our email service provider’s network went down, we were able to close out the lone indicator-driven trade we had open. We closed out the SPDR Energy Select Sector (XLE) December 68 put. Our oil stock indicator approached neutral and we got out of the trade after a holding period of one week for a modest gain.
The email provider outage prevented us from sending a trade alert to purchase a put on gold miners yesterday afternoon. This morning at the open market, we sent out the Trade Alert to buy to open the VanEck Vectors Gold Miners ETF (GDX) December 23 put option. The outage was a bad break for us and our readers because we would have been able to purchase the put at a lower entry price yesterday afternoon. However, our gold stock indicator is still firmly at “-2,” predicting more downside for miner stocks in the near term.
Our indicator readings are below.