The HCM-BuyLine® is clearly negative, and we are sitting on a lot of cash. As it stands now, we are approximately 50% in cash and being patient is key. The markets will turn, we just do not know when, but we are in a very unique position with all the cash we have on hand. Our buy list a few months back was a page or two, now it’s a scroll. Lots of great companies have really dropped down in price.

We are not calling for a bottom, but there are some very interesting statistics on making a case for a bottom in the near-term.

Source: Bloomberg

Cash levels lining up at the highest levels in more than 20 years indicate the 2022 selloff is likely in its late stages. The first key takeaway from May 2022’s Bank of America (BofA) Fund Manager survey revolves around the levels of cash balances now being held in Assets under Management (AUM).  As seen below, these have reached the highest levels since 2001, over 20 years ago.  

21% of stocks are above their 200-day moving average and 79% are below their 200-DMA which means the odds are 89% that stocks are higher in 12 months. Historically speaking, when stocks have had this kind of selloff markets have tended to see a bottom.

The past week put the S&P 500 into a waterfall selloff seen only 18 times since 1940. During the week, stocks were down 5% for the week and had declined 16% in the past 5 months. Declining 16% in 5 months is a waterfall collapse. Waterfall declines show investors are now liquidating stocks with emotional fear taking hold. There are 13 waterfall selloffs since 1970. In 9 of the 13 most recent instances, the S&P 500 was often near the end of its decline.

Markets are in a bad way, but companies are still making very good money: Of the 458 companies that have reported so far (92% of the S&P 500), overall earnings results are beating estimates by a median of 9%, and 76% of those reporting are beating estimates in general.