Weekend Thinking Out Loud

There are a few things on my mind that I wanted to share with you guys. Nothing too crazy, just some thoughts from this week.

A big question that I think we need to ask ourselves is what would surprise us the most. In other words, what is it that could happen to this market (stocks or otherwise) that would catch me completely off guard. What's the last thing that I would expect to happen this year, so I can prepare myself for such an occurrence. Right now I think it would have to be a stock market crash. I just don't see that in the cards at this moment, and I would be really surprised if we saw more than a 20% correction. So I'm committed to mentally preparing myself for that possibility. What are you so sure of right now, that you might just be wrong about?

Let's talk about Coal. Man I've been stalking these guys for months and not a single breakout to speak of. This space has been really disappointing (see here). A lot of the names have a solid base and plenty of potential, but they haven't done anything. There are are two possibilities here; either the bases are bigger, and therefore we should get an even bigger eventual breakout. Or, if the stock market rolls over without these guys doing a thing, guess who's going to get smoked the worst on the way down? These guys. Something to keep in mind.

Speaking of big bases, how about those Transports? Let this be a lesson to all of us. THE BIGGER THE BASE, THE HIGHER IN SPACE. We say this all the time. But we're seeing this one take place in real time. Here were my thoughts on it in November. When something bases for that long, the resolution is extremely powerful. It has happened before and will happen again. We can't ignore this stuff.

I went to the Rangers/Bruins game on Wednesday and had to miss my Hurricanes destroy Duke. Two things I learned that night. When you tivo a big game like that, make sure you turn your phone off because all of your friends will ruin it and give you the results (especially if it's the outcome you want). And two, that guy Zdeno Chara for Boston just might be the biggest human being I've ever seen on skates. I grew up in Miami where there isn't much (any) Hockey, but I do know that he is one scary dude.

And what about the Yen? This is the epitome of markets staying irrational longer than we can stay solvent. Here's what I'm thinking. I think the long Yen trade will come simultaneously with the short US Equities trade. There have been some strong negative correlations here in the past and I think we could see it again. Ive had a 92 target for $USDJPY, but we could easily see it go further. Watch a turn on this one as a possible tell. The Nikkei keeps ripping and appears to be headed to 11400. Again, just my target and could go further, but a level to watch nonetheless.

I wanted to take this time to give kudos to Mr. Market. Remember, its #1 job is to frustrate as many participants as possible. For some time (too long?), the market was rewarding people for blindly throwing money at $AAPL. In just a few months, the stock has given back almost 40% of it's value. Poof, it's gone. It goes to show you that the market doesn't care about your product(s) or how much cash you have on the books. As it shouldn't. The market is here to punish you if you're being lazy. And those that rode apple all the way down with no risk management in place have no one to blame but themselves. It's Real Estate in 06, Financials in '08. And I promise you that we will see it happen again in another space. And then again. And then again.

This takes me back to my first point. Asking the question about what would surprise you the most? I think for a lot of us last summer, it would have been that come January, the Stock Market would be at all-time, or 52-week highs depending on your Index of choice, while $AAPL was chilling on the 52-week low list. I may have been bearish Apple, but I did not see this massive dislocation coming. Kudos to the market once again for making us look like fools for thinking that Apple and the Stock Market would remain so positively correlated.

Speaking of fools, how foolish are all those NFL teams for passing on Colin Kaepernick. Is this kid fun to watch or what? And big time props have to go out to Jim Harbaugh for benching Alex Smith, who was having a terrific year, to put in young Kaepernick. That had to take a lot of guts. Good for him and good luck to both of them next Sunday.

What about Bonds? Everyone is waiting for this turn in the Bond market, a secular turn nonetheless. We're talking about a 30 year bull market folks. This turn is not an event, it's a process. It's going to take time. Trust me, when it turns, you'll know. I think the risk here is that yields see 1%, not 4%. Just a thought, but everyone is waiting for this turn. Everyone is trying to short bonds (including myself). And listen, there will be and have been some awesome short Treasuries trades. But as far as the secular Bull market being over? Don't fight the fed, let it happen. It's a secular shift, not cyclical, so you'll have plenty of time to participate. But it will come when you least expect it, not as everyone is waiting for it.

Finally, my last thoughts are on the market of stocks that we all get to participate in again. It's been a cliche for a long time that this is a "market of stocks" and not a stock market. But we had lost that for a while with those ultrahigh correlations. Isn't it nice that we get a soaring Netflix and RIMM, with Coals doing nothing, Apple getting destroyed, and Financials making new relative highs? There are places to be and places to stay away from again. It seemed like for a while that would never happen again. It was that whole risk-on, risk-off nonsense. We laugh about it now, but a few years ago if you wanted to know how your Microsoft stock was doing, or your Oil long, you had to look at the Euro. What a joke. Happy to be back in a fun market again.

Have a good weekend everybody!

Tags: $KOL $RIMM $NFLX $XLE $EWJ $IYT $DJT