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How to Use The Kelly Letter Signal Calculator

Kelly Letter subscriptions include access to the signal calculator on the premium subscriber site.

Use it to generate your own quarterly Sig system signals using price change only. No guesswork or pundit opinions required.


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Posted in Video | 8 Responses

Now Goldman is Bullish

Two weeks ago, on March 31, I sent you an email with the subject:

“Goldman is bearish, so what?”

The Kelly Letter had just followed its quarter guidance—enormous buy signals across the board—and some subscribers were worried that it had done so right into the maw of a crash foretold by none other than Goldman Sachs.

The firm said that investors could not be confident that a new bull market had begun until the virus spread in the United States began tapering, stimulus measures were working, and Goldman’s US Equity Sentiment Indicator bottomed out.

I wrote that bulls could counter all three:

 

  • On a semi-log plot, worldwide cases of the virus are already leveling out. We’re not out of the woods yet, but we can envision getting there—and the stock recovery will beat us out of the woods.
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  • Anybody waiting for confirmation that bankruptcies will be avoided is going to miss the recovery. How many bankruptcies are fine by Goldman? Surely more than zero, so when does the green light for bankruptcy avoidance go on? Probably about the time the S&P 500 reaches the firm’s 3000 target level.
  •  

  • Maybe Goldman’s sentiment indicator has not bottomed (Although, how can they know?), but others have shown grim sentiment. CNN’s Fear & Greed Index already reached the extreme fear levels it bottomed at in the fourth-quarter 2018 crash. The CBOE Volatility Index (VIX) reached the same panic zone it reached in the subprime mortgage crash.

 

Yesterday, Goldman flipped bullish.

The same team of z-val strategists lead by chief coin tosser David Kostin wrote in a note to clients that the worst of the crash is behind us.

The team admitted that its “previous near-term downside of 2000 [for the S&P 500] is no longer likely. Our year-end S&P 500 target remains 3000 (+8%).”

Here’s why:

“The combination of unprecedented policy support and a flattening viral curve have dramatically reduced downside risk for the US economy and financial markets and lifted the S&P 500 out of bear market territory. …

“If the US does not experience a second surge in infections after the economy reopens, the ‘do whatever it takes’ stance of policy makers means the equity market is unlikely to make new lows.”

Then—and this will sound familiar—the firm pointed out that bear markets usually end before economic bad news reaches its worst.

The same David Kostin crew sent a note to clients on March 20 (one trading session ahead of the bottom):

“We now forecast S&P 500 EPS of $110 in 2020, a decline of 33% from 2019. … We have cut our 2020 earnings forecast three times in 30 days (-37% in total) as the magnitude of the economic slowdown has become increasingly apparent. …

“The stock market is a leading indicator of business trends, and corporate activity continues to deteriorate with no signs yet of a bottom. The first quarter has not even ended and companies have yet to release 1Q results but equities have already collapsed by 32% in one month. The speed of business erosion is unprecedented. …

“In the near-term, we expect the S&P 500 will fall towards a low of 2000.”

From that day’s close through yesterday’s, here’s how SPY and our ETFs have performed:

+20%  SPY

+18%  IJR
+44%  MVV
+59%  TQQQ

Thanks for the warning, Dave & Co.

To become a Goldman Sachs Private Wealth client, you must invest at least $10M. The firm will charge 1.15% to manage it, which comes out to $115,000 at the entry level for the firm’s trademarked coin-toss accuracy.

The Kelly Letter costs $200, requires no minimum account size, and never tosses coins.

Stick with our brand of price reaction.

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Posted in Stock Market Forecasts | Tagged , | 6 Responses

The 30 Down Rule

What is the 30 Down rule?

Why did we change from four sell skips to one for 6Sig and 9Sig? Why is 3Sig not in it? When do we rebalance?

— Jason Kelly is the author of The Neatest Little Guide to Stock Market Investing and The 3% Signal, and writes an investing newsletter called The Kelly Letter. He lives near Tokyo.


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The Best Way to Invest in this Cheap Stock Market

Leverage or non-leverage? All at once, or gradually?

I answer these and other questions from subscribers looking to take advantage of cheap prices in the stock market.

— Jason Kelly is the author of The Neatest Little Guide to Stock Market Investing and The 3% Signal, and writes an investing newsletter called The Kelly Letter. He lives near Tokyo.


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Japan’s Coronavirus Emergency Declaration Was a Mistake

Just when it was time to lead, Japanese Prime Minister Shinzo Abe became a follower of irrational panic.

After Japan’s more than two months of successful limited testing for the coronavirus, he bowed to polls showing that 80% of respondents wanted a declaration of emergency. Glued to headlines from around the world and hair-on-fire social media feeds, citizens decided that because most of the Western world opted for hysteria despite the virus’s low fatality rate, so should they.

The numbers show that they are not thinking straight.

According to JTB Tourism Research & Consulting Co., Japan welcomed a record number of tourists from virus-hit areas in January: Visitors from “China, with 924,000 travelers (+22.6% from the previous year), together with Taiwan (461,000, +19.0%), and Hong Kong (219,000, +42.2%), increased compared to the previous year and recorded the highest figure for January in history.”

The coronavirus outbreak in Wuhan, China began in December. With hundreds of thousands of Chinese circulating freely in Japan in January, the virus was almost certainly unleashed in Japan on a massive scale.

Japan did not go into lockdown. Instead, the government decided early on that it would run a limited testing program—and it worked.

The number of fatalities from coronavirus remained low. Because the vast majority of infected people exhibited no symptoms, it was fine to wait for people to develop symptoms and manage only the ones who did.

Health ministry official Yasuyuki Sahara said at a news briefing on March 17: “Just because we have [testing] capacity doesn’t mean that we need to use that capacity fully. It isn’t necessary to carry out tests on these people who are just simply worried.”

Hear, hear. If an infected person never develops symptoms, there is little reason to care. They could spread the virus to others but the vast majority of them would never develop symptoms, either.

Following what are by now well-known mitigation techniques, including washing hands, sanitizing surfaces, wearing face masks, and practicing social distancing, Japanese people lived life basically as usual with limited impact from the virus.

The results were impressive. Through April 6, Japan counted less than:

4,000 cases
100 deaths

In other words, the way things had been proceeding was fine.

It was time for Prime Minister Abe to take to the airwaves and tell citizens demanding a declaration of emergency:

“Our approach is working. The time for declaring an emergency, issuing recommendations to shelter at home, and other dramatic measures, is long past. Keep yourself clean and covered. Do not gather in large groups. If you develop symptoms, go to a hospital. Other than that, carry on.”

That would have been leadership.

Instead the leader followed misguided opinion to issue an utterly belated, meaningless declaration of emergency. Rather than raising a victorious fist, he wet himself on the world stage.

— Jason Kelly is the author of The Neatest Little Guide to Stock Market Investing and The 3% Signal, and writes an investing newsletter called The Kelly Letter. He lives near Tokyo.


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Posted in Video | 19 Responses
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