The ETFs to Sell and Buy Right Now

Weekly Issue

My wife and I are book people.

We read.

A lot.

You are far more likely to catch us reading in the evening than watching TV or surfing the web.

My wife's many wonderful qualities are too long to list here, but the whole book thing is on there.

We are also library people as an extension of being book people.

One of the first things we did when we moved here was get a library card.

After she left banking, my wife worked at the library in Bonita Springs for some time and loved it.

Even before that, we spent a lot of time at libraries and had been known to show up at the annual library book sales in downtown Orlando with rolling suitcases to take home our collections.

It's shocking (in a good way) how much stuff is available at the public library today. The online tools are fantastic and include study aids for school kids, movie streaming, digital books, newspapers, and even investment resources like Value Line and Morningstar.

I have written on numerous occasions on the influence that books and libraries have made on my life and will almost certainly do so again. Having said that, we ventured off to the downtown library to check it out. We have never investigated the big library and decided we would spend some time after stocking up at the farmers' market to head downtown.

As yet another detour, the Piedmont Triad Farmers Market is one of the very best farmers' markets I have ever been to and might be the very best. We hit it once a week for local produce, meat, and fish.

Inevitably we always come away with some of the locally produced date and fruit bars, fruit, wines, peanut butter, or other concoctions and products.

In homage to our friends at Monty Python, we also occasionally come away with shrubberies. This week's haul included a giant mum plant to add to the growing collection in the yard. The date bar guy also added some new fig bars, so we added those to our collection of healthy snacking material.

It seems we are light years away from the pre-marital Saturdays of hangovers, chicken fried steak and eggs to beat back the demons, and Red Eye's Dock bar for fast boats and football.

I prefer this version of Saturday.

Now, back to the library.

The downtown library is a marvelous city. I thought the investing and philosophy sections were a little light, but the fiction section was enormous, and the kids' section was enormous and extremely well done.

There were a few homeless folks, as libraries have become a magnet for this population over the last decade, but they were orderly and not a problem as I have seen in other cities.

All in all, a pleasant excursion.

I forgot one little detail about our morning adventures.

I forgot today was the Greensboro Pride festival today.

Downtown was blocked off, and we had to walk an extra five or six blocks to reach our destination.

When we left, we decided to walk around a few blocks and see what all the fuss was about.

Let me stop here for a second and tell you that I am a hard-core libertarian (little L. The Libertarian party is a collection of eloquent whack jobs and nut cases who have no idea what it takes to win elections).

I prize free speech, free trade, small government, enumerated powers, separation of powers, the idea that taxes are theft, and above all individual liberty.

When it comes to affairs of the heart and the groin, I truly do not care what your preferences are. As long as it is consenting adults, it is none of my business.

But after walking around the Pride festival, I have questions.

Mostly—Why?

Also—what exactly did the local Baptist Church think they were going to accomplish by having a tent at Pride Day?

Why would you wear a Furry costume out in almost 90-degree heat?

Why would you bring your toddlers?

You have every right to do all the weirdness I saw going on this morning, but…

Why?

So many questions.

I could go on, but perhaps as my wife suggested, I need to wait for the Grumpy Old Man festival.

At least I will like the music at that one.

Now on to more relevant subjects.

(And a whole new day. I never got back on track after dinner last night, so it's now Sunday morning.)

The news flow was strong this past week, and while it has been discussed some in my premium letter, especially as it pertains to banking and credit, we are not going to duplicate here.

Instead, I want to discuss an important fact most people overlook when it comes to trading and investing.

All of this macroeconomic and political noise floating around can be overwhelming.

Every hack, con artist, instant expert, moron, and commission-starved salesperson is going to have some idea of what you need to do to protect your family from the impending calamity or hit this magic opportunity to become a gazillionaire by lunchtime next Thursday, Friday at the latest.

They will take to Twitter, LinkedIn, and any other place they can grab an audience to shout their convictions and sales pitches at max volume.

It's all BS.

Far from being informed speculators, most of the loudest voices are nothing more than gamblers and poor ones at that.

Most people should probably have a sign over their desk that just has three words:

For individual securities, value and credit are the most important.

For macro issues, it is trend.

You do not need to have an advanced degree in economics or finance to identify changing trends in global markets.

You just need a chart.

If you had no TV or internet back in 2021, you still would have known more about the US economy than most if you just noticed that bonds entered a downtrend.

You didn't need to know about the whys and hows of global instability and persistent inflation in 2023.

The gold market told you loud and clear.

I did not need to know anything about agricultural conditions or practices (although I could just ask my son-in-law a couple of targeted questions and sit back and take notes if I really wanted to know the nitty-gritty details) to note that grain prices entered a long-term downtrend in the summer of 2022.

There are lots of reasons to think stocks are overvalued right now. At some point that will matter.

There have been reasons for not owning stocks since the downtrend began in 2023.

You got stopped out in April, but the markets knew long before the pundits and experts that money flow and sentiment would overcome trade concerns, and the positive trend was back on.

There is a school of thought that PE ratios and such do not matter.

News flash: if you are using shorter-term time frames, they never did.

If you are using a 5-day or 20-day moving average, you are trading, not investing.

When trading, the only thing that matters is price and volume.

I have a research project that addresses the question, but starting PE and credit conditions have a huge influence on future returns.

I am fond of saying that broader market valuation does not tell you when you may get thrown out a window.

It tells you what floor you will be on when it happens.

Trend tells you when the window is open.

The smallest stocks had been left for dead and were considered a garbage pile and not worthy of consideration in this age of hi-tech and mega caps.

Trend followers were buying back in May just before the markets exploded higher by 25% in just a few months.

I keep hearing that trend following and value investing do not work anymore.

Neither scales well. Returns deteriorate when you reach a certain size.

Individual investors can and should use them to pile up cash.

Trend followers have been long stocks for two years without blinking.

They were short bonds for three years. They have been long cattle for a year, short the dollar since March, and have been long Bitcoin for two years.

Okay, Tim, we get it. You have been singing that song for some time.

What is trend saying now?

Glad you asked.

First, stocks are still in a long-term uptrend.

The indices are nearing the overbought levels where the 20-week moving average becomes much more important.

Most sectors are in an uptrend, but healthcare and consumer staples have both given recent trend sell signals.

Consumer staples are now in a confirmed downtrend. It might be worth a trade to short their ETFs or buy an inverse ETF like $SZK ( ▲ 1.68% ). If you do, use a tight stop. Remember the secret to trend following success is to love small losses.

Healthcare is also showing a short-term sell as it has fallen below the 20-day moving average, the traders' trend line. The inverse here is $RXD ( ▲ 0.41% ). The same ideas about tight stops apply.

By tight stop, by the way, I mean $0.25 to $0.50. You can always re-enter.

Be aware you are fighting the main trend in the market, which is up.

Oil, natural gas, and sugar are in confirmed downtrends.

If you drive, use electricity, or are as fond of ice cream as I am, that is all good news.

The downtrend in natural gas is extended and near levels where long-term reversals have occurred.

I am still a long-term bull on natural gas and would be a buyer of dividend-paying natural gas producers and infrastructure assets at these levels but would not trade the stuff outright without short-term confirmation.

This market is called a widow maker for a reason.

Long-term bonds and 10-year notes are in uptrends.

I am not sure if the gold market is convinced that political unrest is going to get worse or that inflation will move higher, but it remains in a solid uptrend.

Silver is coming right along with it.

Don't bother telling me why silver has its own unique dynamics and industrial profile.

I am aware.

It does not matter. They are both in uptrends.

Copper prices collapsed after tariff levels were changed, but they are now giving the first indication of a new developing uptrend.

Is inflation going to go higher?

Right now, coffee, beef, and pork are in uptrends.

Sugar, orange juice, and lumber are moving in the opposite direction.

You can spend hours trying to decipher what the Fed did, or did not do, or what it means, or how much rain fell in Brazil last night, or you can look at the charts and see what is happening.

Far more assets and indices are in an uptrend than a downtrend now.

Stocks are moving higher all over the world. So is gold.

Bonds are suggesting lower rates are coming.

Energy prices are low.

So is chocolate and sugar.

If we just look at the headlines and the insane rambling of the Instant Experts of the Internet, the world looks like an awful place on the verge of catastrophe.

Through the lens of price, it really does not look so bad.

Neither does credit at the nongovernment level.

Value is another story.

Value. Credit. Trend.

If we get these right, we can ignore everything else.