Interesting Comments from Leon Tuey

Interesting Comments from Leon Tuey 


Not too many people have heard of Leon Tuey, but he is a Canadian technical analyst, now in his eighties who has a good long term track record and is usually worth listening too.

"Short-term, the major market indices and their internal measures are overbought.  Moreover, short-term sentiment backdrop has deteriorated.  Hence, a pause would not be surprising.  After a minor pause, however, the rally will continue as the intermediate gauges are far from overbought.  Moreover, momentum is re-accelerating.  Long term, the primary trend remains powerfully bullish and the end is nowhere near in sight as the six major factors (monetary, economic, valuation, sentiment, supply/demand, and internal/momentum/technical) continue to give bullish readings.  One of the most amazing aspects of this great bull market is sentiment.  Although the bull market is in its ninth year and most stocks are up several hundred to several thousand percent, investors remain skeptical and pessimistic.  Note that many hedge fund managers are bearish.  Seth Klarman’s Blaupost holds 42% of its assets in cash.  In terms of asset allocation, funds are sitting on a mountain of cash and very low in equities.  In fact, funds are the most underweight in U.S. equities in ten years.  Also worth noting is the shrinkage in the supply of stocks.  In 1996, over 8000 stocks traded in the U.S.  Today, that number has been halved.  This supply/demand imbalance creates an explosive situation for the market.  When the prevailing bearish sentiment recedes, that huge hoard of cash will find its way back to the equity market.  I can hardly wait!

In conclusion, evidence continues to suggest that investors are witnessing the biggest bull market on record.  The first leg of this great bull market commenced on October 10, 2008 and ended in May 2015.  As always, it was driven by an easy/accommodative monetary policy.  The second leg commenced in February 2016, which was driven by improving economic conditions caused by the monetary easing of the last 8.5 years.  Hence, earnings momentum accelerates.  Accordingly, it is always the longest and strongest [segment of a secular bull market].  Investors should emphasize industrials, technology, healthcare, and resource issues and other economy-sensitive areas.

One of the biggest mistakes investors make in a bull market is selling too soon.  Accumulate favored areas when they are oversold and hold for the long-term.  The time to liquidate is when the Fed starts to tighten meaningfully, i.e., when the Fed drains liquidity from the system; raises the discount rate many times in succession; and inverts the Classic Yield Curve (13-week T-bill Yield vs. the 20-year T-Bond Yield).  Do not be distracted by the “noise” and the black headlines."