The 3s Report: It's Quiet...Too Quiet?
ROAR Score weekly update
Our "Reward Opportunity and Risk" (ROAR) score remains at 40 for the 4th week in a row. The S&P 500 is up about 1.5% in the 3 weeks since ROAR moved up from 30 to 40.
This means a 2-ETF portfolio that can only be allocated to SPY and BIL would now be 40% SPY and 60% BIL.
We have also been simulating a more aggressive ROAR portfolio, in which SPY is never less than 50% of the SPY-BIL ETF mix, and the ROAR Score is applied to the other half of the portfolio. So with ROAR at 40, the aggressive mix is 50% + (40% of 50%) = 70% in SPY, leaving 30% in BIL.
3 Quick Thoughts on markets
This is about the time those tariffs will start to become more important from a time standpoint. 90-day windows happen fast. Though not as fast as the Fed meetings coming up. Our resident Fed-watcher Jack Bowman tells me he has a countdown clock to one later this month. In days, not in minutes, I think.
This is more about what I am doing, and certainly not what anyone else should do, since this is research, NOT personalized advice. That said, I see this is one of the more opportune times to ladder bonds that I've observed in some time. And I have, and I will.
Gold is on many investors' minds these days. They even sell it at Costco now. It has reached the point where something big is ready to occur, technically. I like a gold rally as much as the next guy, but I sense that the "easy" money has been made. We'll see.
3 ETF (or index) charts I’m watching
It's been quite a move since I drew that purple circle during April, which then saw the S&P 500 rally 10%. Now, it is either stuck around here, ready to attack the all-time high about 3% north of here, or preparing to peel off and head sharply lower. Why so much confusion? Have you seen how the markets are being swung around by every piece of news on the economy, tariffs, bond rates, etc.?
Anyone remember the old movie "Stripes," starring Bill Murray, about a misfit group of US Army trainees? This chart reminds me of the scene in which one of the soldiers tells the lead character, "we're missing graduation!" This type of move is great if URA is already owned. But now, near that familiar $33-34 area, it is high risk and high reward.
If you have the "cajones" to see this small cap ETF through to a higher level, more power to ya. I'll sit this one out, unless I find a collar setup I like. But again, high risk accompanies high reward.
3 stock charts I’m watching
Nothing says, "modern markets" to me like this chart of BIIB. Encouraging, but this looks like many biotech stocks. I'm not currently involved, but if I were considering it, I'd likely opt for an ETF. But that's just me. I like to manage risk on multiple dimensions.
On a day we wake up in the US to headlines about NATO potentially "5X-ing" their defense spending on ground-based air support (read: drones), all defense stocks tend to move up on the radar. And in the charts. This one has a chance. I own a very small position in it (LMT).
Hey, it's late on a Tuesday, and I was looking for one more stock to finish this week's 3s Report. So I'll just say...no Rob, don't say it!...OK, I'll say it...since that nice breakout a year ago, Philip Morris (PM) has been smoking!
Final thoughts for now
10 years ago, the markets would have been volatile. Now, they are a casino-like atmosphere. But they are also full of opportunity. We just have to recognize what moves them now. Algorithmic trading, indexes dominating retail and institutional investing, and 24/7 financial media. That, and "everyone's" in the stock market now.
This is great and downright dangerous at the same time. The sheer upward pressure from flows into stocks has been THE driver the past 10 years. It is not so much earnings growth or other fundamental factors as it is a simple case of supply overwhelming demand. Over and over again, with every dip reliably bought.
That might change. If it doesn't, there's no reason the major averages can't continue to lift, at least through summer and even into next year. But along with an extended market getting more extended, the concern any investor should have if they are stock-heavy and planning to rely on that nest egg to retire or stay retired is clear: we just saw what happens when things "break." There is still a very high chance they break again. Plan accordingly.