That’s what an excited neighbor told us after randomly knocking on our front door earlier this week.
We followed her out to our yard by the sidewalk to find a trio of scientists readying to catch and study a pair of Cooper's Hawks that have been nesting in a tree across the street. They constructed a trap with a net stretched between a couple of poles and a distress call playing over a loudspeaker.
First, the female swooped in, followed by the male. The hawks were quickly entangled in the net and the scientists began to band and measure them.
In an asset class where 80% drawdowns are a regular occurrence, it goes without saying you need to manage your damn risk.
By simply identifying a level where you get out of the trade, you are at a substantial competitive advantage, in this asset class more than any other.
There should be no shame in flipping your approach as new data comes in. At our shop, we pride ourselves on it.
But to the crypto junkies and laser eyes crowd, that'll get you called a "FUD'ster" or "paper hands".
Don't listen to these people.
They're truly worse than the gold bugs and permabears. They don't deserve your attention.
With any market, not just crypto, our primary goal is to make money. And to do that, in more cases than not, we have to play defense. It's what we're doing in stocks right now - it's just a regular part of putting money to work.
The Outperformers is our newest scan that pinpoints the very best stocks in the market. It’s the fastest, easiest way to find quality names that are primed for major moves.
The goal is that as the market rally progresses, the sector rotation within the market will reflect in this scan. So while our Top/Down Analysis helps us with the broader view of the market, this Bottom/Up scan makes sure that we catch the slightest change in sentiment.
Key takeaway: Record highs in equity indexes buoy investor sentiment that has remained optimistic without a significant challenge over the past year. Bulls ticked higher across our sentiment indicators last week, yet we still see evidence that risk appetite is turning (NAAIM Exposure Index, NASDAQ trading volume, overall levels of options activity). These new highs and levels of optimism must contend with the undercurrents of lackluster breadth measures and an absence of pessimism. Risks lie just beneath the surface. This raises the possibility of a more complete sentiment unwind when risks are realized and prices begin to falter.
Sentiment Report Chart of the Week: Know What They Say, Watch What They Do
The latest All Star Charts "Follow The Flow" report is out, and once again there's a great looking opportunity there that caught my eye.
In a nutshell, the Flow report is looking at "a list of stocks that large financial institutions are putting big money behind (via options)… and they’re doing so for one reason only: Because they think the stock is about to move in their direction and make them a pretty penny."
The opportunity setting up now is in a stock in a sexy sector that looks like it's ready to resume the rocketship ride it embarked on in 2020.
Just because there's no divergence in the A/D line doesn't mean the market can't correct. But if there's a divergence in the A/D line, you better pay attention.
That's what's happening here.
Remember, at first it was just the Nasdaq Advance-Decline line diverging. This one peaked back in early February. Notice how we had a divergence before the COVID crash as well:
The market environment directed our focal point toward the Dollar. And now that it appears risk is coming off the table, we’re shifting our focus to the Yen.
Usually, when we talk about risk-on/risk-off behavior and the Yen, the AUD/JPY is at the center.
Key Takeaway: Indexes make new highs, but action beneath the surface is not encouraging. Equity fund inflows surge in the first half. Bond yields moving lower are unlikely to support equity market strength.
The Energy sector fell out of the top spot in our S&P 500 sector rankings last week, though on an equal-weight basis and at the mid-cap and small-cap level, Energy remains the relative strength leader. Our industry group heat map confirms this broad strength within the Energy sector.
Communication Services and Technology are in the top two spots of our relative strength rankings. Financials and Real Estate round out the leadership group.