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:
- During selloffs it's important to watch how risk off assets behave for an accurate gauge of sentiment. Yesterday, as the market opened lower, there was piling in of assets into fixed income and gold names. As the day wore on, the treasury market was relentless on the upside, while gold stalled a bit. Nevertheless, this appetite for US Treasuries despite recession fears basically being eliminated at this point tells of not only a lot of misallocated capital that will require equity exposure at some point in the near future, but also of a generally bearish undertone in decision making.
- Speaking of rates, the interest rate on the 10 year makes the earnings yield on the S&P look increasingly attractive, especially as treasuries are being bought as stocks sell off. With earnings not being as poor as many expected, there is an increasingly significant likelihood that investors will take notice of this discrepancy sooner rather than later.
- Semis look like they want upside. This may be THE sector for 2019, along with software related names. The earnings they have released have largely dispelled bearish theories. With that, they are mostly well below their 2018 highs.
- AMZN just has the looks have a laggard in 2019. With everything developing the way it is for Bezos, the stock may find itself hard up for consistent bidders. The owner and the company are inextricably tied here. And the personal problems/battles of the owner only seem to be gaining steam.
- The current selloff shouldn't be much more than multi-day affair. It's certainly hurrying through the motions as it negatively affects investor spirit. Next week trade talks with China resume and it's option expiration so expect the market to zig after everyone has been conditioned by zag over the past couple of days.
- The gap down this morning, which is below yesterday's low on the NDX is a pretty classic trap. We're gapping right onto a very significant support area. Good spot for a reversal either today or Monday.
- Yield on the ten year is also sitting on significant support levels. This is about as low as it should get for the month of February.
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