Every day I go through roughly 200 stocks/indices/indicators, several times per day, looking for signals, attempting to connect dots and ultimately, hoping to find risk/reward situations that create outperformance.
The title Lies, Damn Lies seems appropriate as when the markets want to reveal any kind of truth, they first do so through blatant lies. Conversely, whenever truth appears apparent, there is likely to be deception involved.
These are simply thoughts (some completely random) as I attempt to connect the dots:
- There has been a pretty distinct pattern taking shape in the markets during January: Gaps down are met by buying pressure throughout the day. Earnings seem to be protracting this trend further into the month. It seems that macro pressures build overnight, led by news related to China, which is then met by a bullish onslaught of fundamental micro information related to the overall health of the U.S. economy, recession be damned, culminating in an upward resolution of the gap down.
- I've been dwelling on the metals complex quite a bit. It occupies my thoughts fairly consistently as I'm monstrously bullish on it long-term. However, I've come to realize that I have to compartmentalize that bullish fervor if I want to trade the complex with any semblance of competence. I've been back and forth on it. As it pertains to the short to intermediate term, it has become clear that there are a lot of bearish investors hiding in metals from the Q4 macro, recessionary boogie man onslaught. Typically, during a resumption of a secular bull market, there will be a clearing out process of all the crevasses that investors tend to rely on to soothe their fears. The metals complex should be no exception during the first half of 2019. May be good for some trades on the short side as a result.
- Attempted to short the market last week on a relatively light basis with some QQQ. Failed miserably as I covered on Friday. My work has this as an area of volatility, with the potential for a very short-term top that lasts no more than a few days. I'm not sure if it's even worth attempting another hit on the QQQ.
- There are several individual short opportunities setting up in sectors like financials and retail. Short-term opportunities, however, there is enough bang for the buck there to make them worth a swing.
- After last week we now know how terribly off everyone was on the financial sector. The Wall Street asset management and analyst community are basically trend following algos in suits with advanced degrees and complimentary sales skills. Other than that, they know nothing about the markets, except how to collect a paycheck from pretending they do.
- NFLX has gone from sure fire long opportunity to a complete mixed bag after Q4 earnings. Of course, I exited our trade in the name prior to earnings being released so we currently have no vested interest. May look at it again close to $300, if it gets there, depending on numerous variables, of course.
- One more indication that interest rates have entered secular uptrend territory: The buyer base has shifted so dramatically over the past decade, from foreign led buyers to now domestic buyers, that their needs have a strong probability of dictating the future path of rates. In every case one can make, their needs encompass an interest rate environment markedly higher than it is today. Here is the Bloomberg article on it.
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