Every weekend we publish simple performance tables for a variety of different asset classes and categories along with brief commentary on each.
As this is something we do internally on a daily basis, we believe sharing it with clients will add value and help them better understand our top-down approach. We use these tables to provide insight into both relative strength and market internals.
This week we want to highlight our US Equity Index and Sector tables, as they are both showing continued evidence to support some of the trends we've discussed recently.
In a post earlier this month, we scanned the S&P 500 for the strongest uptrends so that we'd be prepared to buy stocks when the market stabilized. Well three weeks and an additional 25% drawdown later, and we're going to do a similar exercise.
The last two days' rally in stocks confirmed bullish breadth divergences which suggest a tradeable bottom is near and put the S&P 500 back above its 2018 lows around 2350, giving us a well-defined level to manage risk against. If prices fail to hold this level, all bets are off, but as long as we're above it, we think the bias is to the upside over the coming weeks to months. As such, we're looking for long opportunities that offer asymmetric risk/reward setups in the strongest stocks, three of which we outline below.
These are the types of markets that are a statisticians dream come true. They get to run all sorts of scans and tests to see how long it's been since volatility did this or the rate of change in the S&P500 did that. To be honest, it's all a bunch of bullshit. The market doesn't care about your stats.
I'm not going to go over all of them because I don't find them very helpful. In fact, I find them incredibly deceiving and, even worse, distracting. I felt that way on the way up with their stupid, "S&P500 hasn't moved 1% in a single day in x amount of days....". Who gives a damn?
Today is no different.
Let's talk about what actually matters.
2750 in the S&P500 was support in the first half of 2019. We closed the week still below that. We might have a slight bullish momentum divergence, but if S&Ps are below 2750, we put this index in the "No-man's land" category:
If you're reading this it's probably because you've read our Table of the Week where we identified roughly 100 of the strongest stocks in the S&P 500. After digging into the charts of all these stocks, we came up with a handful of setups that we believe are currently offering the best reward/risk. Here they are, in no particular order.
Are you noticing the relative strength in Emerging Markets? That is NOT something we would expect to see if the world was actually coming to an end.
I can't stress this enough, stay away from the glorified gossip columns. They know less than nothing. You know who knows? The market. So that's where we'll get our data.
Think about it like this, there are more people and firms with more money and better intelligence than any of these governments, communist or otherwise. Are you actually going to trust the propaganda being put out in the "news"?
Or do you trust the people putting actual money behind the information they're spending a fortune to get? When we want to know what's really going on, we turn to the markets. The rest is pure junk.
For now, we're in an environment where we want to be buying stocks. We want to be incredibly disciplined with our risk levels, probably more than usual, but buying stocks nonetheless.
We're buying a few Chinese Internet Stocks. If the world isn't ending after all, this could be an interesting place to look for huge winners. I'm already seeing relative strength there.