VTIP - The Current Upswing Started In October 2022: Updated As Of March 31 2023

2023-04-03 16:19:28 ET

Summary

• I discuss two of James Picerno’s posts (Part I & Part II) from last week.
• I conclude that a market uptrend began on March 30 and 31.
• The Bull Market, which began 14 years ago, still moves higher.

Introduction

On March 30, 2023 (Thursday), James Picerno published a timely and crucial post regarding the next economic movement either on an expansion or into a recession, titled, "Is The U.S. Facing A Slow(er)-Moving Recession Threat?" This is Part I:

I plugged in a comment:

"A no-doubt outstanding post on one of the most popular and delicate topics, the market momentum/trend watch on macroeconomic issues. The conclusion is charming:

"The question is whether the recent downturn in economic momentum is a temporary soft spot in an otherwise ongoing expansion - or the start of a slower-moving recession that eventually takes its usual toll? Both scenarios are plausible. Deciding which will prevail will require more incoming data." (From the text.)

I am a fan of ETI and EMI which competes with the PPO Approach ." (The italics are mine.)

On April 1, 2023 (Saturday) , he followed up, posting Part II , entitled, "Is The U.S. Facing A Slow(er)-Moving Recession Threat? Part II."

I put another comment as:

"Another excellent follow-up post (PART II), and concludes:

"This much is clear: the degree of red ink in the table above reminds that the so-called economic resilience remains precarious. The headwinds for the expansion, although significant, have yet to trigger an NBER-defined recession. But if the labor market and/or consumer spending stumble in March, the run of good luck may run out of road." (From the text, the italics are mine.)

The Focus

The ETI and EMI are the composite indices with many indicators. James Picerno is the frontrunner of the data-driven analysis on the market trend and momentum.

His two posts (Part I and Part II) clearly have reached near the final stage, but the final decision can be made when a couple of data points of March will be available.

The alternative approach, the PPO Approach , is just based upon one single variable , the S&P 500 Index (SP500), so it had all data points for six months (from Oct. 03, 2022 to Mar. 31, 2023).

The Conclusion

Now it has the conclusion about the 5 months-old Uptrend, started October 2022: It has firmly stood as of March 30, 2023 (Thursday) , and the Uptrend exploded the next day on March 31 (Friday and the end of Q1, 2023) .

The Struggle of Uptrend During Q4 of 2022

As shown in Table 1 (which runs two quarters - Q4 of 2022 and Q1 of 2023 - to completely view the Santa Claus Rally [SCR] is too long so is in Reference after the text), the Uptrend seemed to be overturned by the Bears Big Bombs [BBBs] such as 1) 6m (Oct. 5 - Oct. 12), 2) 5m (Dec.1 - Dec. 7), 3) 4m (Oct. 31 - Nov. 3), and 3m (Nov. 25 - Nov. 28).

The Uptrend seemed to be defeated by the BBBs during the early in December 2022, but the SCR - 1) +1.75 (Dec. 29), 2) +0.75 (Jan. 4), and 3) +2.28 (Jan. 6) - surely has sown the seed for the ensuing the January Rally and the Following Huge Upswing in the last of March 2023.

Table 2 (Q1 of 2023) witnessed the Ultra Upset Upswing [UUU] reading: 1) one m/P - 11 vs. 9 (EVEN), 2) two m/P - 4 vs. 4 (EVEN), 3) three m/P - 2 vs. 4 (EDGE on P), and 4) four m/P - 1 vs. 1 ( EVEN ) The UUU had only one EDGE and three EVEN.

Table 3 gave the final verdict for the UUU, opening votes as 5 vs. 8 in favor of "P."

Note that "P" got all four votes in January and three out of five in March. The last two votes on March 30 (Thursday) and 31 (Friday) were extremely enormous!

How to Invest in the UUU

"We cannot compete forecasting with the Fed, but we can have a vital advantage by getting the current status of our 5-month-old Uptrend with our "Paper and Pencil Only ((PPO))" approach.

Early finding a turning point to an Upswing gives us a big win because the starting moment of the turning point gives always big gains. Our PPO Approach easily beats the sophisticated computer models for this task." (From " How to Invest in the Real Time Era ")

Per the above quote, I have been very busy to welcome the UUU which I have waited for almost three years, by holding about 70 "POW" which are under their cost basis.

Already about 5 "POWs" were released, and have made some good trading. From Monday, April 3, 2023, our old Bull (born on March 09, 2009) will move forward more productively.

Six Vanguard ETF Portfolio Templates

For long-term investors, 6 investment templates with six Vanguard Group ETFs are introduced. All ETFs are commission-free.

Six VG ETFs: Vanguard Total Stock Market ETF ( VTI ), Vanguard Extended Market ETF ( VXF ), Vanguard All Except U.S. ETF ( VXUS ), Vanguard Total Bond Market ETF ( BND ), Vanguard TIPS Bond ETF ( VTIP ), and Vanguard Total International Bond ETF ( BNDX ).

Six VG Portfolios :

(1) VG.A (50:50.2) VTI (50%) BND (50%)

(2) VG.B (50:50.4) VTI (30%) VXF (20%) BND (40%) BNDX (10%)

(3) VG.C (50:50.6) VTI (30%) VXF (15%) VXUS (5%) BND (30%) VTIP (15%) BNDX (5%)

(4) VG.D (60:40.2) VTI (60%) BND (40%)

(5) VG.E (60:40.4) VTI (35%) VXF (25%) BND (35%) BNDX (5%)

(6) VG.F (60:40.6) VTI (35%) VXF (20%) VXUS (5%) BND (30%) VTIP (5%) BNDX (5%)

These 6 ETF templates would have an important built-in advantage over other portfolio strategies, namely an almost no expense ("ANE"). The ANE would work out tremendously for long-run investors.

You can select the top three if you are a momentum player for a relatively short term. If you are a longer-term investor or a contrarian, you would go with the bottom three. But if your investment horizon is longer than five years, you may choose any Template. If you are younger than 50, you might increase the equity allocation to 70%, or more, or even 100%.

ETFs are more tax efficient than counterpart mutual funds. If you allocate permanently as I do, the power of tax savings enhances. Also, you don't have to worry about trade mistakes or market timing for rebalancing.

The Concluding Remark

About 70% of market trading is done by machines baked by AI and heavy software. Recognizing this many years ago, I have traded in real time (not online but manually). I never thought I could make money, by beating John Doe.

As explained in my recent articles, we are actually dealing with real time, whether we like it or not. Monetary policy, each trading, all financial information performs in real time.

The question is how to make money in this environment? The answer is that the only way to make money as an individual investor is to stretch the invest-time horizon longer than, say, 5 years, and with well-diversified portfolios.

Reference

For further details see: