In this Episode of Allstarcharts Weekly, Steve and I discuss the Intermarket Relationships that help identify the next direction for US Interest Rates. These assets include Regional Bank Stocks, Utilities, Real Estate Investment Trusts, Copper, Gold and TIPS among others. Which way are Rates heading next?
We've been watching some of the Energy ETFs we track most of this year for potential mean-reversion opportunities on the long side.
We recently discussed for our Institutional Clients an opportunity in the Small-Cap Energy ETF (PSCE), which rallied 17.50% from its 2018 lows before reversing back to those levels again.
The main issue in Energy remains that there appears to be an attractive mean reversion opportunity at the ETF level, but when we drill down into individual stocks there aren't many clean setups...making it difficult to identify what the main drivers of this move higher would be.
Let's take a look.
For the purpose of this exercise, we're going to look at Oil Services ETF (OIH) because its risk management level is the cleanest of the Energy subsectors.
JC and I are generally on the same page about a lot of things, but this week our brains seem to be very in sync as we're writing about the same topics with a slightly different spin on each subject.
With U.S. Large-cap Indexes breaking out to new all-time highs, many are wondering when, and if, the Small-caps are ever going to catch up. The Dow Jones Industrial Average, S&P500 and Nasdaq100 have all taken out former highs and are currently in uncharted territory. The Mid-caps, Small-caps and Micro-caps, however, are still all well below their 2018 highs.
While we like to pride ourselves in looking at more charts per week than almost anyone on earth, I get a lot of value from regularly speaking to clients and colleagues. Tuesday was one of those days that I found myself on the phone speaking with people around the world. One theme that came up multiple times was the underperformance in Small-cap stocks throughout the late 90s. It's something we've seen before. U.S. Large-cap stocks can do very very well even with small-caps underperforming, like they have since last year.
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?
Financials are a big focus of ours right now. We can make a strong case that this is the most important sector in America. Traditionally, Industrials are the most positively correlated with the S&P500 and Technology is the largest sector by market cap. But we don't have bull markets without bank stocks. That's the way this works.
In this episode of The Money Game, Phil and I talk about the Availability Heuristic and why we are more likely to invest in certain types of companies depending on where we live. This is a really interesting phenomenon that makes a lot of sense. I'm lucky that I get to avoid this bias more than others simply because of the process I use to perform my analysis. It's a solution to a problem I didn't even know I had! This is a short one that I think is worth a listen just to learn a little bit more about yourself.
Remember last year, and the year before that, and the year before that, when Amazon would just rip higher all the time? That uptrend came to an abrupt halt last Fall, and $AMZN came tumbling down like many other stocks around the globe. After almost a year of consolidation, it appears as though Amazon shares are ready to get going again.
Remember when Outrage Twitter was running wild with conspiracy theories about Chipotle poisoning its customers and the business was doomed? That was fun. You know who had more fun? Long term investors who turned off the "news" and stayed the course.
Earnings are coming up that may serve as a catalyst to launch the next leg higher in shares of $CMG.
There is potential for a 10-to-1 payout if we nail it and $CMG has a monster gap along the way to get us to and through our price target. But our aims are a bit more modest. We're simply looking to capture some of the barbacoa in the middle.