Last week was our Members-Only Conference Call, where we discussed what we're seeing in Equities, Commodities, and Currencies. During our discussion around Equities there were two themes that came up over and over again due to their impact on the overall market's direction: weakness in the Financial Services sector and small-cap under-performance.
Given the mixed signals we continue to get from this market, I wanted to share my thoughts on these themes and get feedback on what you all are seeing out there.
This week the Global Industry Classification Standard (GICS) expanded the Telecom Services sector to include Consumer Discretionary and Information Technology components, with it being renamed the Communications Services sector next Friday, September 28th.
In this post I want to highlight the major changes to the sector classifications, chart the new sector (using the back-filled IXCPR Index), and then finish up with some of the components that are the most actionable. State Street, which runs the popular Sector SPDR ETFs, has created a comprehensive document on these changes that I'd encourage you to read in full to understand all the nuances surrounding these changes.
In this episode I asked my friend Ryan Detrick to come talk about the quantitative work he does as part of the technical analysis he provides for advisors at LPL Financial. I have been following his work for years and have gotten to know Ryan well during that time. I was really looking forward to this conversation and it exceeded all of my expectations. Ryan does an excellent job of using basic mathematics to debunk popular myths told to investors about the market. We discuss the impact of a rising rate environment on U.S. stocks, the Yield Curve, Stock Market Seasonality and some of the things he is currently seeing in the market. This is a can't-miss episode!
We're always focused on positioning. Stocks don't go up because of some article written by a 26 year old journalist who has never made a trade in her life. Stocks move based on positioning from institutions. When the market is caught leaning the wrong way, the unwind can create spectacular moves. This is the key to the market: positioning, not the noisy media.
As many of you know, every single day I look for risk vs reward opportunities that are skewed in our favor. We're not here to be right, we're only here to make money. There is a big difference between the two. In other words, we don't care if we get it wrong. We just want to make sure that when we are right, that we're really really right. Isolating asymmetric risk vs reward opportunities is how we do that, and I believe we do it very well.
I really don't think this market is ready for the US Dollar to collapse. We've had a monster rally in the Greenback all year and emerging markets and precious metals have felt the pain. I believe that's about to change dramatically.
The Island Reversal is a rare but important pattern that has shown up across many of India's Major Indexes this month. As a result, I want to use this post as an educational opportunity to highlight what this pattern is, as well as explain how we're interpreting it in today's market.
There are tiny little irrelevant markets everywhere like Pot stocks and Crypto Currency. These could disappear tomorrow and it won't matter. The sovereign wealth funds, hedge funds and other monster institutions that make markets move have to be in the bond market. They're too big not to. So if you want an inside look at the money flow from one place to another, an intermarket approach really helps.
I've been a lonely stock market bull for most of this year. It feels like every time I've told people that I think we're closer to the beginning of a bull market than the end, they think I'm crazy. That reaction has gotten me even more bullish. Not only does price continue to suggest we're heading much higher, but sentiment and positioning points towards the same.
I've made the argument that Technology is going to take us much higher, as it is just now finally breaking out above the March 2000 highs. It took 17 years to digest those 1990s gains. We're now just moving on. All that market cap getting going is one obvious catalyst that I've been talking about since last year.
I started taking wine a little more seriously over the past couple of years. It's been fun to learn about different varietals and the countries that grow them best. The geography is really interesting and it's fun to go visit places like Tuscany and Bordeaux. The whole process has been rewarding in a lot of ways. When you're at a nice restaurant, for example, you want to make sure you choose the best wine that's going to work best with your meal for your specific palate at your individual price point. Being able to explain your preferences and have an intelligent conversation with the Sommelier helps you do that.
It feels good to be back in California. I just spent the past week in Texas, and before that I was in Toronto and Philly. I won't be leaving the west coast for a few months and I couldn't be more thrilled about it. I like it here.
When you force yourself to leave to computer screen as much as I do, you'll quickly learn the value in getting away and then coming back to reevaluate everything you previously thought before you left. There is a lot of data waiting for you once you're back at the desk. Is there enough data to change your mind or does it just confirm what you felt previously?
I spent last weekend, both Saturday and Sunday, looking through charts and enjoying the start of Football Season. At this point, College and Pro Football have each begun. Back when I lived in New York, this was my favorite time of the year: September and October. The weather is the best and everyone is back from their weekends in the Hamptons, Jersey Shore, Cape Cod or various other northeast vacation spots. The city gets going again. But so do the markets.
There are few people in this world who spend as much time with active traders as Mike Bellafiore, who has been a Managing Partner at SMB Capital since 2005. I think his unique perspective on trading and traders themselves is the perfect compliment to a lot of the other guests that we've had on the podcast. In this episode, Mike talks about some of the qualities that he's seen in the more successful traders as well as common mistakes he sees being made on the desk. Throughout the conversation, Mike gives us an inside look into the trading floor, how they separate traders into teams and the way the more experienced, proven traders help the younger up and comers. I really enjoyed this one!
A few weeks ago I took a look at the Precious Metals space from the top-down for Premium Members of Allstarcharts, concluding that despite stretched sentiment there's very little evidence that suggests being long this space over the intermediate or long-term. With that said, today I want to discuss the developments in this space since then that have shifted the short-term reward/risk in favor of the bulls.
Fine. I get it. Businesses making political stances -- whether you agree with the stance or not -- rubs you the wrong way. And sure, aligning with a professional athlete at the center of a hot-button controversy only makes it more cringe-worthy for you. You're entitled to that opinion and I support your right to voice your displeasure. But for the love of all that is sacred in the world of trading, do.not.let.your.politics.or.emotions.get.in.the.way.of.making.profitable.economic.decisions.
After a more than 40% year-to-date and 60% 2-year decline, we've been eyeing Tata Motors on the long side for some mean reversion. For the last two months the stock has been range-bound, but the recent breakout has shifted the reward/risk in favor of the bulls over the short-term.
