January Conference Call: 5 Key Takeaways
1. "Gold is making new lows relative to the rest of the commodities and its making new lows relative to US stocks. The way I learned it, was- Bottom Fishing can be very hazardous to your wealth."
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Gold has been an underperformer post the achievement of our target in August 2020. The yellow metal continues to disappoint against commodities and stocks and we have deliberately stayed clear of this precious metal. Our stance is clear-unless the price moves above its all-time highs (in US Dollars), we are happy to be patient.
2. "If you ask me, what is the one thing you're looking at that potentially throw a wrench in this rally that would suggest maybe a more defensive posture moving forward, I think its a Dollar rally"
The rally that we have witnessed in stocks and commodities had a strong tailwind in the form of the US Dollar Index correction. If the Dollar Index does manage to bounce-back and move higher, stocks and commodities will find it hard to continue rallying. This is one space we will continue to observe in order to discern any growing strength in the dollar going forward.
3. "You know we're seeing these breadth thrusts where the percentages of indexes around the world are getting overbought. In other words, showing bullish characteristics. And these breadth thrusts tend to appear in the beginning of moves, not towards the end."
As the market rally continues, we're seeing greater participation from indexes around the globe. These momentum thrusts are characteristics of the beginning of strong bull markets. They certainly don't indicate that the rally is coming to an end.
4. "Emerging markets are making new all-time highs, Frontier markets are also attempting to breakout."
Good indicators of market sentiment are risk-on risk-off indicators. Emerging markets and Frontier markets performing well in a market rally and breaching previous highs is a good sign of a risk-on environment. Frontier Markets include Kazakhstan, Nigeria, Kuwait and Qatar. This indicates that market participants are willing to take on more risk and are bullish.
5. "Mid-caps breaking out to new all-time highs, that's huge! Big multi- year base, breaking out to new highs."
Nifty Mid-caps have broken out of a three-year base and seem ready to shine. Only broader market participation can sustain an ongoing rally and the strong move in Mid-caps is suggesting just that. We are bullish above levels of 20,880 with a target near 32,000.
We hope this gave you some perspective on the topics we're focused on in the current environment. There are clear trends across various asset classes that we want to continue taking advantage of.
If you missed this 100+-slide presentation, you can watch the recording and view our Trade Ideas Page for a summation of the ideas discussed.
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