I don't have a lot of faith in people, or media or economists. But bonds are something we certainly take seriously.
There's no bullshit with them.
The biggest players in the world have no choice but to be intimately involved in fixed income markets. So if you're curious which way the pendulum is swinging, you'll be able to see it in bonds.
Here's a quick look at US Interest Rates making new highs - from the 1yr to 10yr yields these are going towards the upper right:
Not the fourth installment released late last year, but the original movie – the one that came out more than 20 years ago.
One important caveat: My son is only 13. The Matrix is an R-rated movie filled with violent action scenes. So I didn’t take the decision to let him watch the movie lightly.
Ultimately, I decided the movie raises some important ideas that I wanted to share with him. I'm not talking about ideas of simulated reality or various theatrical elements. For me, one of the key insights is that by tuning out the noise, we can improve our decision making. By focusing on what matters, we have more time to act. When wisdom combines with clarity of purpose, the seconds seem to tick by more slowly.
This doesn't just happen in the movies. Watch an experienced quarterback engineer a winning touchdown drive in the final two minutes of a football game and you will get a sense of what I mean. They seem to have more time to decide, act, and react than anyone else on the field. Maybe time is indeed passing more slowly for them.
High open interest combined with diminishing implied volatility, increased price stability, and thin futures volume all contribute to a scenario where the probabilities of a long/short squeeze are elevated.
We're still in elevated cash positions and, for the most part, still sitting on the sidelines.
As many of you know, something we've been working on internally is using various bottom-up tools and scans to complement our top-down approach. It's really been working for us!
One way we're doing this is by identifying the strongest growth stocks as they climb the market-cap ladder from small- to mid- to large- and, ultimately, to mega-cap status (over $200B).
Once they graduate from small-cap to mid-cap status (over $2B), they come on our radar. Likewise, when they surpass the roughly $30B mark, they roll off our list.
But the scan doesn't just end there. We only want to look at the strongest growth industries in the market, as that is typically where these potential 50-baggers come from.
US Stock Market Indexes can be a funny thing. As investors we need to understand what's inside of them. Which stocks and sectors drive them higher or lower?
This seems like an afterthought in some circles, especially after the major large-cap indexes have put up nice returns the past 3 years. The S&P500, for example, was up 28%, 16% and 27% respectively in 2019, 2020 and 2021.
But at the individual stock level, it certainly didn't feel that way in many cases.
I have a good feeling 2022 will be the opposite. I think this year, the average and median stock has a higher likelihood to outperform the major indexes, for one simple reason.
We're buying an $MU June 100/125 Bull Call Spread for an approximately $6.50 debit. This means we’re long the 100 calls and short an equal amount of 125 calls
Check out our short video with the thought process behind these trades:
We debuted a new scan recently which goes by the name- All Star Momentum.
All Star Momentum is a brand new scan that guides us towards the very best stocks in the market. This time around, we have incorporated our stock universe of Nifty 500 as the base. Among the 500 stocks that we follow, this scan will pump out names that are most likely to outperform the market.
While we go through our lists of sectors and stocks on a weekly basis, we thought of launching a product that would highlight the strongest performers in our universe. These are the ones that are primed for an explosive move.
Just like The Outperformers scan, this is a list of stocks belonging to the sectors that display relative strength in the market at any given point in time. Since sector rotation is the lifeblood of a bull market, we will be ahead of the curve before the gears keep shifting.
It seemed like the bond market was heading in the right direction – except for Treasury spreads. The 2s/10s spread was the missing piece of the puzzle, continuing to push toward new 52-week lows…
Until now!
Only a couple of trading sessions into the new year, the bond market is providing plenty of fireworks. Rates are jumping higher across the curve, and critical treasury spreads such as 2s/10s, are following higher:
Key Takeaway: Year-end strength in stocks alleviated some of the concern that had crept into investors’ collective psyche. Short-term sentiment swings aside, investors remained positioned aggressively long stocks at a time when strategic risks remain high. December set a monthly record for equity ETF inflows and that price chasing pushed equity valuations to some of their highest levels on record. The optimism in positioning is not reflected in the sentiment surveys. But if the unwinding in the speculative bubble that peaked early last year gains steam, look for a lack of optimism to be replaced with outright pessimism, followed by a re-positioning of assets.
Sentiment Report Chart of the Week: Commodities soar but struggle for attention
If this blog post was served up to you when you were searching for the latest scare porn on the omicron covid pandemic, I'm sorry to disappoint. But if you'd like to draw a correlation between the rising omicron cases and rising share prices of Micron technology stock --- you wouldn't be the first person to commit a #ChartCrime in service of a good story.
Micron Technology $MU is a stock that's been on my radar since the team published the Under the Hood report around Christmas highlighting the setup.
