Weekly Note - April 8, 2020

The markets are closed this Friday so any trading should take place Thursday (tomorrow) or Monday.

I have made a few important refinements to the weekly publications over the last few weeks and these are summarized in this link:
Please contact me if clarification if needed.

We have technically been in a Plant season, although the sense of crisis has overwhelmed the last several weeks. For those with a long investment horizon, this has been a good time to add money to your account. Some subscribers are doing so. The second bottom, described below, is likely to have clearer buy signals from the MRI. However, we cannot tell at this time if the second bottom will be lower or higher than where the market is now.

The comments below show where we are in the W-shaped recovery pattern and briefly discuss the recent refinements to the model portfolio lineup in the weekly publications. Links provide additional detail.

2020 Recovery Plan

The phases and steps described below are most applicable for people with investment time horizons less than, say, 7 years. For people with longer investment horizons, staying with your original model portfolio is reasonable through all three phases (1,2, and 3).

I have written that the W-shaped market recovery is most likely in this current situation. The graph below shows my estimate of where we are now.

2020 Recovery Plan – A W-shaped Market Recovery Pattern Appears to Be Most Likely

Decline #1

Step One – First Bottom: Move to the target weights of your selected model portfolio. DONE: The alert about the first bottom was issued on March 25.

Phase 1 – “Upleg A” to the Peak of the Relief Rally

We are currently seeing a rally in stocks, which I believe is most likely a relief rally or bear market rally. During this phase, adhere to the target weights of the model portfolio you used during the recent major decline. We appear to be midway through rally.

Step Two – Peak of the Relief Rally: I will notify subscribers when I think we are near the peak of the rally and will assess the target weights of the main model portfolios. I may give additional guidance to reduce the aggressiveness of your account. See (https://marketresilience.blogspot.com/p/changing-portfolio-aggressiveness.html) for more information on changing the aggressiveness of your account.

Prior to the peak of the relief rally, review at the following link the description of the refinements to the model portfolio lineup. This blog page gives an overview of the recent changes that will make managing the aggressiveness of your account easier as we move through the market recovery. Please note the description of the new "Onyx Special 2020 Recovery (sg117)" portfolio. I have designed this to be used in the case of a long period of economic weakness related to pandemic, social distancing and related economic weakness.  Follow this link and go to the last section of the post:

Phase 2 – “Decline #2” After the Relief Rally

Maintain a less aggressive stance in your account until the second bottom. If the pandemic and economic situation deteriorates further, the less aggressive stance will be appropriate for a longer period of time.

If the pandemic and economic situation improves more quickly, decline #2 may be muted. If the situation improves greatly, the W-shaped market recovery patten could morph into a V-shaped pattern. We will get a better perspective on this several weeks from now.

Phase 3 – Upleg B and Beyond

Step Three - At the Second Bottom: Switch back to your original model portfolio and/or reduce cash in your account to resume the original level of aggressiveness of your account. This is the buying opportunity you don't want to miss. When we get to this time, you can also consider switching to a model portfolio that is more aggressive than the one you used during the decline.