For this entire month we’ve been discussing why a continued neutral approach toward equities was best and what we needed to see to get more aggressive on either the long or short side. The bull case has been building all month and after weeks of patiently waiting the market has finally given us the last piece we needed to get involved, a well-defined risk level.
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The Biggest Rallies Come In Bear Markets
Welcome to the new market regime, young lads. Many of us, and many more that are way older than me, have seen plenty of bear markets. At our shop, we rely heavily on global markets to give us information about stocks as an asset class, so we’re accustomed to seeing bear markets all the time. It’s nothing new to us. But I understand that many of you are new to this whole up AND down thing. It’s normal, I promise.
Today I want to stress an important point that I think gets forgotten: The biggest stock market rallies come in bear markets! You don’t get 6% rallies in the Dow when we’re in healthy uptrends! You need serious volatility to spark something like that, and it only happens when risk is extremely elevated. I’m sure you’ve noticed that we’re getting much bigger down days AND up days in the market lately. This is not characteristic of the type of environment where stocks are going up. It’s the type of behavior we see, historically, when stocks are going down. This is one of many reasons why we’ve wanted to sell stocks throughout October. [Read more…]
[Premium] Our Shorts Have Been Working, Here Are 5 More!
The market is a beautiful thing. We have uptrends and we have downtrends. We weigh the evidence regularly to determine which one of these we’re in, or if it’s a sideways trend. Our approach to the market has to depend on the market environment we have. In other words, we have to play the cards we’re dealt, not the cards we might want. So we first determine how we want to approach the market, and then we decide which vehicles would be the best way to express that thesis.
Here are a list short ideas that I think present favorable risk vs reward opportunities: [Read more…]
[Premium] Russell 3000 Sector & Industry Performance
From the desk of Tom Bruni @BruniCharting
Over the weekend I ran the performance metrics of the Russell 3000’s Sectors and Industries to get some perspective on where the leadership is since the S&P 500’s high on October 3rd and year-to-date. In this post I just want to share this table and talk about some of the themes I see.
Momentum Divergences Need Confirmation
From the desk of Tom Bruni @BruniCharting
On the blog we’ve been discussing why a more neutral approach to the market is best, as well as what we’re looking for to mark a tradeable bottom. Last week we saw an expansion of new lows and stocks hitting oversold conditions in the Russell 3000, however, we are beginning to see some improvements in its daily momentum readings.
Cash Is A Position Too
From the desk of Tom Bruni @BruniCharting
When the weight of the evidence is pointing in one direction as it has been for most of the last two years, it makes sense to be aggressive and take advantage of the clear trends while they’re intact. However, when conditions change and the evidence becomes more mixed, a more neutral approach is appropriate. But what does that look like from a practical sense?
[India] Cash Is A Position Too
When the weight of the evidence is pointing in one direction as it has been from early 2016 through mid-2018, it makes sense to be aggressive and take advantage of the clear trends while they’re intact. However, when conditions change and the evidence becomes mixed, a more neutral approach is appropriate. So what does that look like from a practical sense?
Was That A Breakaway Gap In Verizon?
From the desk of Tom Bruni @BruniCharting
The new 52-week high list has been pretty scarce as of late, but Verizon’s earnings announcement propelled its stock above an important level of resistance to 17-year highs, signaling further upside may be be ahead.
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