(Enjoy the latest insights from the Reitmeister Total Return newsletter posted after the market close Thursday 3/26…yet still highly relevant today).
You gotta give investors credit for some really creative expressions. But few are more amusing than the one that we are in the midst of now: Rip Your Face Off Rally.
Here is the definition from the Urban Dictionary:
“This is an extremely painful event. It typically occurs in the stock market, when you just finished getting so leveraged up on full margin with short positions.
The stock market then viciously turns and “heads” up the other direction all while ripping your face physically off. It happens so quickly it is typically only noticed when you look up from your keyboard to ask your trading partner what happened, and he only see’s a pair of lips and what used to resemble a face talking to him.”
No, we are not leveraged up. But we certainly were expecting the market to head south while it goes higher and higher.
The biggest mistake in the midst of this kind of event it to succumb to the peer pressure and climb on board the rally only to find out it was just an illusion before the next down draft emerges. And now you have doubled your losses.
Why an illusion?
Think about it folks. The # of US citizens filing for first time unemployment claims just rose 1200% week over week to over 3 million. Yes, we averaged less than 250K claims per week for years and years and years. And then it jumps to over 3 million in just 1 week. Way worse than expected.
Do you believe it is a one and done increase?
Or do you believe that this is the first wave of many with much higher unemployment and much weaker economy to come?
The odds strongly point to the pain of the Coronavirus recession and bear market being far from over. Because if not, then why is this relief package from Congress nearly 3X larger than the Financial Crisis package???
I believe this technical rally is about to run its course. And we need to hold on to our hedge for the likely downward action to follow. Does that start tomorrow? Or next week?
Don’t know. But soon enough is the likely answer. So hold on tight dear friends and try and keep your face intact 😉
What to Do Next?
The above article is really the next chapter after writing this commentary earlier in the week: Buy the Bounce? Or Sell the Bounce?
In that article I contemplate the possibility that this rally punctuates the end of this short, painful bear market with a new bull emerging. But then I show the much stronger logic behind the idea that we have not seen bottom yet on this bear market. Mostly because of the continued rise of the Coronavirus in the US and how that will spell further economic hardship and lower stock prices.
No. We don’t have to stand there and see wave after wave of downside in our portfolios.
There is a very effective solution that will actually lead to gains as the market explores lower lows. I am referring to the construction of a hedged portfolio as I have done in the Reitmeister Total Return newsletter.
This same hedge produced a +5.13% return the previous week when the market tumbled -14.97%. And gained again today as the S&P finally gave back -3.3%. And should be equally effective as this faux rally gives way to the next rush to new lows.
I know its crazy out there. And I am trying my best to help investors make sense and profit from the situation. The best way for me to do that is give you 30 days access to the Reitmeister Total Return.
This is my newsletter service where I share more frequent commentaries on the market outlook, trading strategy, and yes, a portfolio of hand selected stocks and ETFs to produce profits whether we have a bull…a bear…or anywhere in between.
Just click the link below to see the 8 stocks and 3 ETFs in the portfolio now, and all the future trades as we find bottom on this bear and the new bull emerges.
Wishing you a world of investment success!
…but everyone calls me Reity (pronounced “Righty”)
CEO, Stock News Network and Editor, Reitmeister Total Return
SPY shares fell $1.11 (-0.44%) in after-hours trading Friday. Year-to-date, SPY has declined -20.80%, versus a -20.80% rise in the benchmark S&P 500 index during the same period.
About the Author: Steve Reitmeister
Steve is better known to the StockNews audience as “Reity”. Not only is he the CEO of the firm, but he also shares his 40 years of investment experience in the Reitmeister Total Return portfolio. Learn more about Reity’s background, along with links to his most recent articles and stock picks. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|SPY||Get Rating||Get Rating||Get Rating|
|DIA||Get Rating||Get Rating||Get Rating|
|IWM||Get Rating||Get Rating||Get Rating|
|MDY||Get Rating||Get Rating||Get Rating|
|QQQ||Get Rating||Get Rating||Get Rating|