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V2 Model January 30, 2021 Update

V2 Model January 30, 2021 Update

Good morning!

Welcome new Members.

Here is V2 performance versus our benchmark of SPY.

This week:

V2 -10.27%

SPY -3.35%

This year:

V2 +4.14%

SPY -1.02%

The major market indexes finished the week lower with all averages down over 3%. Small caps, which have been a bright spot in recent months, also pulled back over4%. In addition, both the MSCI EAFE and Emerging Markets (EM) international markets followed the US markets lower this week.

The surge in GameStop and other highly shorted stocks has taken the country’s imagination by storm. These parabolic moves probably don’t reflect an overall unhealthy market, but institutions covering shorts at sizable losses may be removing capital from some big-cap names.

I have enclosed YTD V2 Ratio #1 charts for each holding as of close Friday. You can see the ratio crossed for UPRO and we moved to cash. The ratios for TNA and TQQQ are both approaching crossing points - but have not crossed yet. As such, we remain long with those holdings. If we do not see price improvement on Monday I would expect a crossing to occur. At that time I will notify all and we will change allocations. Most likely we will go 100% short (SH).

Related, we did not see a huge run to risk-off assets such as Treasuries and Bonds. TLT was only up .08% this week. AGG was only up .05%. That would indicate this is a normal and to be expected pullback in the context of an uptrend. A short term correction.

That said, I have enclosed daily charts for the TLT:SPY ratio and the AGG:SPY ratio. You can see the annotations. Both have broken very short term trends to more risk-off relationships. This could morph into something we should respect, but it has not happened yet. In both cases, we are still well below a downward sloping (green) 100 day EMA.

Did Gamestop rattle the markets? Yes. I also believe the lack of progress on the next stimulus and Virus/Vaccine uncertainty contributed to the uneasiness in the markets. You can see the VIX jumped 51% this week to close at 33.09. It broke out of its consolidation box as fears of more volatility escalated. The good news - it closed below two prior key areas (see red horizontal lines). The bad news - the 15/20 MA closed above an upward sloping (green) 100 day EMA. Time will tell which direction we go.

Our plan this week? We will stay flexible and keep an open mind to changes in either direction. We will follow the math.

V2 currently holds:

TNA (40%)

TQQQ (32%)

CASH (28%)

The V2 Model has performed exactly as expected.

Distance=Victory

Chris

ps. Please invite others to join The Vig Company. And also, please, do not share the V2 Model allocations with others. We keep the monthly charges low for all as everyone pays their own way. Our information should not be copied or shared in any form.

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