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:
- The greatest indication that investors are finally starting to get the picture that this rally is not a bear market rally meant to separate speculators from their dollars is the action in long-term treasuries. Investors are beginning to understand that a 2.75% yield won't cut it in the face of a rallying stock market, where companies like JPM are up 4% this month while sporting a 3.5% yield. Ten year should be back above 3% within months. Continue to be short a concentration of TLT.
- As this rally continues on the dynamics of the market are changing. This is one of the better trading environments in recent years, where astute investors can take advantage of both sides of the market. With that said, there are more opportunities developing on the short side of tech and financials. Long opportunities are more focused along the lines of defensive companies, such as BMY that I detailed in yesterday's lies and on Twitter.
- As you may have noticed during the past few notes I've posted, the metals complex has been an area of confusion. I dumped our metals names at the beginning of the month due to the fact that I thought the markets were going to fully "risk on" status. Metals don't play well in a risk on environment. Up until yesterday, they were holding their own given the acceleration to the upside in equities. That changed today. It looks like metals traders and bond traders are getting the memo that these assets don't play well with where we are now. Long-term very bullish on metals. Have to pick and choose the spots, however.
- MSFT finally took off for us in an admirable way today. Want to see the trend continue with momentum to the upside for the remainder of this week. Currently long.
- PAYC is another name we picked up in early January that has taken its time accelerating. That changed today. The momentum on the upside looks promising. The company automates the HR process. With unemployment at historic lows and a natural tendency for companies to chase efficiency, the growth here should continue for sometime to come.
- USB is our only large cap financial name. They are reporting earnings tomorrow. I'm expecting a good report, as this is a very well run bank. Perhaps one of the best run among the large cap banking names. In hindsight, given my conviction level for financials moving up in price, USB was too conservative of an investment versus a Citibank, as one alternative.
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