This long weekend we had more time to take a step back and think about the things that are currently going on in the market. A big theme that stuck with us was the strength in stocks in the Utilities sector. The question was/is whether this strength in higher dividend paying stocks is evidence that rates are about to fall? Or is there such an overwhelming amount of strength in the stock market, that Utilities are just included in the rally?
But sometimes I think we just need to pay attention to what's right in front of us, which in this case is Utilities stocks going higher. So why don't we just buy utility stocks and not worry about the bond market for a hot minute? The most bullish thing a stock can do is go up. And that's exactly what's happening here.
For those new to the exercise, we take a chart of interest and remove the x/y-axes and any other labels that would help identify it. The chart can be any security in any asset class on any timeframe on an absolute or relative basis. Maybe it's a custom index or inverted, who knows!
We do all this to put aside the biases we have associated with this specific security/the market and come to a conclusion based solely on price.
You can guess what it is if you must, but the real value comes from sharing what you would do right now.Buy,Sell, or Do Nothing?
What a run we're having in our Long May 100-strike calls in $BYND purchased on December 20th for $4.00 when the stock was trading below $77/share.
I wish I could say this was a regular occurrence, but of course we know this isn't true. However, this I know with absolute certainty: stepping up to the plate and taking our swings in trades with proper reward-to-risk setups, appropriate position size, and a plan for risk management again and again allows us to "get lucky" every once in a while. And sometimes it only takes one or two trades to make your month or your year. This $BYND trade certainly has a solid chance to become one of those year-makers.
Back to luck, there's a big difference between true "luck" like winning the lottery, and manufacturing your own luck through Best Practices. Which luck would you rather have?
I've been contacted a bunch by people who followed us into this trade and the general feeling I get from people is that they are scared -- scared of letting these enormous open profits get taken away by the evil Mr. Market.
My big question coming into this weekend was what should we make of the action in Utilities lately and what does it mean for Bonds?
Utilities are making new all-time highs on an absolute basis, posing this question on Twitter: "So is the breakout in Utilities to new all-time highs a signal that a Bond breakout is coming, or is it simply a bi-product of overwhelming demand for Equities?
This got a lot of attention and responses, so I thought it'd be worthwhile to quickly outline what I'm watching in Utilities and the Bond market over the next few weeks.
In late August we started to see some signs of a potential bottom forming in Commodities as they approached long-term support with momentum diverging and in October we finally got a breakout.
Today that breakout in the Thomson Reuters CRB Commodity Continuous Index remains intact and the trend in Commodities as an asset class has shifted from one we want to be selling rips to one that we're buying dips.
From an intermarket perspective, there are a lot of signals we've discussed that support higher Commodity prices such as the AUD/USD and CAD/USD breakouts, and today I want to share three more data points that have shown up in the last few weeks.
You guys know that I just tell it like it is. I don't care what happens. The stock market can double or can get cut in half. Gold can go to zero tomorrow or to 10,000/oz and I won't care. I'm too old to worry about the economic or social implications of market moves. Been there, done that and it doesn't help. We have to look at everything as objectively as possible.
Now, with that said, I have some thoughts that some of you may not appreciate. But I'm not here to tell you what you want to hear. I'm here to tell you what I'm seeing right? So bear with me.
The Large-Cap indices continue to churn near the highs as Mid and Small-Cap stocks play catchup. Sector leadership remains clear, but we're now beginning to see signs that a former leader turned laggards may start heating up again.
Earlier this week we looked Consumer Goods before they broke out and Technology looks to be showing similar signs of buying pressure.
Let's take a look.
Here's the Nifty IT Index attempting to break back above 16,200 resistance as momentum finally breaks back into overbought territory. If prices can break decisively above resistance then this long-term uptrend could accelerate and target 18,775 over the next few quarters.
A lot of mixed responses on this depending on their timeframe. Some were shorting the failed move and seeing how it developed, while others were patiently waiting for another breakout attempt to get long.
With that as our backdrop, let's take a look at this week's chart.
I had a great day in New York City Wednesday. Good meetings, good eats and good people.
BNN Bloomberg was nice enough to invite me on their network to talk charts.
Catherine and I discussed some of my favorite sectors and industry groups. We went over the macro picture and beginning of this new bull market for stocks.
Most importantly, in my opinion, we went over what it would take for us to get more defensive, at least in the near term.
So we've been keeping an eye of the Broker/Dealers space, and one of the names we have a close eye on has triggered our entry. Here's Bruni:
Intercontinental Exchange ($ICE) is consolidating tightly since August and now pressing up against all-time highs. A breakout above 95.50 would signal the continuation of its long-term uptrend and target 103.50 over the next 3-6 months.
