You guys know that I prefer to incorporate more of a weight-of-the-evidence approach to markets rather than basing my decision making on a single indicator. We look at stock markets all over the world to find themes, both bullish and bearish, and then take advantage of them within U.S. markets. I then take a similar approach and go sector by sector in the U.S., including a series of sub-sectors, to break it down even further and find themes within the U.S. As you guys well know, the reason we were bullish since January was because of the weight-of-the-evidence internationally, not because of what we saw in the S&P500 or Dow Jones Industrial Average. [Read more…]
In this week’s members-only letter we discuss the following topics:
- Is the Mean Reversion Higher In Stocks Still In Play?
- What Do We Do Now That Treasury Bonds Hit Our Upside Targets?
- What It Will Take To See Apple, Twitter and Yahoo Rally This Month
- Where is the Euro headed next
- Why It’s Important To Define Your Time Horizon
- The Sectors That Will Lead In February
In honor of Superbowl 50, we created a countdown of what we consider to be the most important 50 charts in the world. These include U.S. Stocks and Sectors, International Indexes, Currencies, Commodities, Interest Rate Markets and Global Intermarket relationships. Some of these are more actionable than others, but collectively I think they truly tell the story of global market risk, or risk aversion for that matter.
Members of All Star Charts get access to all of this information 24/7, so we would like to invite you to start a 30-Day Risk Free Trial and Join us to see if our community is right for you. We have received incredible feedback from our members and will continue to improve the platform.
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Here is the video in full (audio begins immediately, video gets going after 30 seconds)…..Enjoy! [Read more…]
The U.S. Stock market and most of its sectors continue to rally. As happy as we are to see this, and as much as we expect this to continue through February, these are only counter-trend rallies within larger structural declines. The good news is that counter-trend rallies in bear markets historically tend to be the most powerful kind of rallies. I think there is still room to the upside in many different sectors with very well-defined risk.
In this week’s members-only letter we discuss the following topics:
- How Much Further Can U.S. Stocks Rally
- What Is The Best Way To Profit From Higher Oil Prices?
- Which Emerging Markets Will Do The Best This Month?
- Why “no one” Saw This Yen Rally Coming, But We did?
- How Low Are Interest Rates Going and How Can We Benefit?
- Structural vs Tactical – How to Make Money In This Environment
On Monday afternoon I was over at the Bloomberg West headquarters as a guest on their 4PM show “What’d You miss?”. This is a show that I’ve appeared on a few times from New York, so it was cool to see their San Francisco studios. My take is that the snack bar in the Lexington Avenue building in New York is much better, but the view of the Bay in San Francisco beats the view of Queens, NY all day. So we’ll chalk it up as a tie.
Anyway, last time I was on the show back in December we wanted to be short the S&P500, Apple and Emerging Markets while simultaneously buying U.S. Treasury Bonds. This has worked out very well over the past month as stocks got crushed to start the year, so we couldn’t be happier. Now, although a lot of our tactical downside targets were hit last week, including Apple into the low 90s, structurally things have actually gotten worse. I think going forward, any strength should be used as an opportunity to sell into and much lower prices are coming for U.S. Stocks.
Here is the full interview: [Read more…]
In this week’s members-only letter we discuss the following topics:
- The Sell-off to Start The Year Is Perfectly Normal and Was To Be Expected
- What Do We Do With Apple Stock?
- Where Is The Best Risk vs Reward Now?
- My Favorite Emerging Market Short
- Where Do We Buy Crude Oil?
- Solar Energy Stocks Are What We’re Most Interested In
- What the Strength In Utilities Is Telling Us
Thursday morning I was on the Benzinga pre-market radio show discussing our current market environment. I’ve been in a heavy cash position since March 20 so I am approaching this market from a very unbiased perspective. We get into a lot of intermarket behavior and sector rotation as we enter the second quarter.
Here is the audio in full:
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Tags: $T $IYZ $SPX $IWM $RSX $RUSL $USO $CL_F $XLU $IYR
Sometimes I just like to babble about what’s on my mind. It helps me organize my thoughts and you guys keep asking me to do more of this. So here’s what I’m thinking….
The year is off to a great start for us. I’ve never gone into a new year this prepared. Sunday night January 4th I couldn’t even sleep I was so excited. It was like I was a little kid on Christmas Eve. I keep a spreadsheet with a list of if/then statements where if certain things happen I would enter long or short positions in asset classes of all kinds. So far this year I’ve been in soft commodities, energy stocks, foreign stock markets and base metal stocks. Some of these were longs and some were shorts. If you follow my stocktwits and twitter streams, you pretty much know what I’ve been looking at.
This whole interest rate thing is hilarious to me. I never knew the bond market could be so funny. Wall Street Economists keep telling us that rates are going higher and I have no idea what they’re looking at. Why on earth would they think that? Fed Fund Futures keep pricing in lower and lower probabilities of the first hike at the October meeting. Last I checked we were now down to just a 56% chance, down from over 80% last week. It’s hysterical to me.
I get asked every day when Crude Oil is going to bottom. I really have no idea. Bearish sentiment is stretched to levels rarely ever seen before. But that alone is not a reason to buy it. I’m looking for a momentum divergence to even think about putting on a position and so far we have not gotten it. We can put Unleaded Gas and Heating Oil in that same camp, with respect to both sentiment and a lack of momentum divergence. I don’t know when they will bottom. So we’re focused elsewhere. Euro is in that category too. Maybe they bottom simultaneously. We’ll see…
Natural Gas has exploded this week. To me, this one came out of no where. Earlier in my career I would have gotten upset with myself for missing this move. But now I realize that there is no reason to get mad. Looking back at the setup last week, there wasn’t any reason why I would have bought it. I have to stay true to my process and wait for only the perfect setups. If something makes a big move and it wasn’t my trade, there’s no reason to be mad. It wasn’t for me. And still isn’t, for that matter.
As far as US Equities go, I still don’t see any reason to put money to work up here in the major averages. One of my favorite positions so far this here has actually been a short SPY with a long REITs as a hedge. This has worked well and don’t see any reason why this still won’t work. I’m looking at 0.42 target on that spread (IYR/SPY). As long-term interest rates keep getting killed, there will continue to be a relative demand for higher yielding stocks. Fixed income guys aren’t getting their yield in the bond market. So they have to go to stocks. This is the reason I believe REITs and Utes doubled the returns of the S&P500 last year and will continue to do so in the first quarter.
I went to see Louis CK at Madison Square Garden last night. He was hilarious as always. So much fun. But I have a problem with the cavemen that run the arena. I get to the front of the line and show my tickets on my iPhone and these idiots make me go across the street to the Pennsylvania Hotel to print out the tickets. I couldn’t believe it. I thought this was 2015? I haven’t printed out tickets to a game or show in god knows how long. Anyway, I get to the hotel business center and there are 20 other angry people there printing out tickets wondering why we’re all doing this. And then if things couldn’t get any dumber, the guy’s gun to scan the bar code on the freshly printed tickets couldn’t even scan the bar code. He had to enter the numbers manually!!!! I couldn’t believe it. Still can’t. MSG get your act together. This is 2015 and we use phones not printers. And you wonder why the New York Knicks have the worst record in the National Basketball Association.
Some of the soft commodities are interesting. Coffee got off to a great start. We’re long Sugar futures currently and as long as we’re above the September lows, I love this one. OJ doesn’t look too bad either. My buddy Jonathan Krinsky at MKM Partners calls this the Breakfast Trade. Love that. I like Sugar the best of the 3.
Around the world I think we can see some nice mean reversions in countries that have been beat up. I like Malaysia down here. The risk/reward is definitely in favor of the bulls. I only like it above this week’s lows. Below that and things get messy.
Shorting Base Metals has worked out well for us so far this year. I was upset because we’ve had a small position. I didn’t want to chase it. This brings up an interesting point that has become the theme around the office this year. I think I’ve caught myself saying, “well that’s the downside of risk management” at least once or twice every day. It’s turned into a joke. But funny or not, it’s true. If you miss it you miss it. This isn’t venture capital where missing a good one could be a disaster. For us liquid market guys, there will be other opportunities.
Business wise things are going well. We’ve received great feedback from our subscribers about our weekly research reports. I love putting them together. This is really just my homework that I have to do anyway. I think of it as a professional athlete having to go to practice or to the gym. Even when it’s a Saturday morning or Tuesday late at night and I kind of don’t feel like putting in the work, I have to do it. No choice. I owe it to our paid members, I owe it to investors in our hedge fund and I owe it to myself. Hard work pays off. If I didn’t take the time to look at all of these charts, there is no way that I would find as many opportunities to profit around the world. I really want to have a great year, especially if the US Stock Market doesn’t do well. It will be nice to point to the success of an uncorrelated portfolio looking for absolute returns. I’m trying my best.
Solars are another interesting one. The trend here has been to the downside for almost a year. With downward sloping smoothing mechanisms on both daily and weekly timeframes, I think we break to the downside soon. Will that have anything to do with crude oil breaking to new lows? Possibly. But I want to be shorting these guys on a break of the lows from the 4th quarter. Solar stocks look terrible as a group.
Why are so many people lazy when it comes to math? I read things and am told things constantly that contradict 3rd grade math. I don’t understand. Interest Rates and US Dollars are positively correlated? What idiot told you that? When one is making new highs and the other is hitting new lows…..guess what? They’re not positively correlated buddy. The furthest thing from it in fact. I don’t get it.
I went to an art class the other day. It was so much fun. I’m not exactly the most artistic person. I’m not very good at drawing or painting. Although Howard Lindzon calls what I do “Chart Art”. But I had a blast at this class. It was at bar down in the Bowery. As it turns out my college buddy is dating this girl who is a lawyer during the day. But her heart and passion is really in art. So she decided to start this company called Art By Friends NYC. She teaches the class. So a few of us went to go support her. It was about 2 hours on Tuesday night. We drank wine, ate pretzels with a delicious mustard dip and my painting came out terrible. All good though. Some of the people in the class were incredibly talented. It was amazing how good some of these came out. But there was no judging. Everyone in the class was very supportive and friendly. Great time.
I don’t know when Copper is going to bottom out. It looks horrible. Structurally this is and has been a broken market that will take plenty of time to bottom out. We will get rallies, but I believe they will just be counter-trend in nature and the bottom will be a process. A long process. This tells me I need to keep looking at shorting base metals and base metal companies.
The metal I do like is Palladium. Relative to the others this is by far and away the best one. I want to buy this, but only on a breakout above 825. Below that and I don’t think there’s any reason to be involved long or short. The precious metals, gold, silver and platinum have done well so far this year and I think they have a little more upside maybe. But this isn’t something I want to fool around with. I think there are better setups elsewhere. But we’ll keep a close eye on them. Platinum to me has been the cleanest. I think we see at least 1350 on that one. Gold and Silver should benefit as well.
So that’s what’s on my mind.
What are you guys thinking these days?
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Tags: $GC_F SI_F $PA_F $PL_F $PALL $GLD $SLV $PPLT $TLT $TNX $DX_F $UUP $KC_F $OJ_F $JO $SGG $SB_F $SPY $EWM $IYR $XLU $CL_F $USO $RB_F $UGA $HO_F $UHN $HG_F $JJC $UNG $NG_F