An S&P 500 heatmap from Friday shows the extent of the Red Sea inspired from across The Pond. However… money flowed into one stock that actually hit new highs. These are great days to isolate equities with concentrated capital chasing alpha.
What better way to celebrate new found volatility than to offset bearish blog bias with bullish resistance ???
Check it out:
The MO MO Trade For nearly 2 years, waiting for pullbacks, loading, then unloading on measured move highs has been a nice strategy for Altria. Lather, rinse, repeat. Of course, this doesn’t have to last forever, but as long as the higher highs > higher lows trend continues, we’ll stick with it. (more…)
Quite a Friday we had last week, huh? Upon checking my “End of Week” Charts, I noticed some interesting behaviour and thought I’d share my observations. Last weekend sometime, I shared a weekly chart of the US Dollar and that it was approaching its 20 week MA. I use the 20week and 20day moving averages as basic bull/bear filters. I’m only bullish on stocks that are above both and I’m only bearish on stocks that are below both.
I find this makes for an easy and efficient filter. I thought that the US Dollar had reversed short of the test until I saw it after the close Friday and realized it had tested the 20week MA exactly. Take a look. (click any chart for a larger size version)
We are ready to enter into a 7 week weak period if you give credence to the cycles of the market. Presidential election years have a rhythm, and it is telling us to short this market until mid June. Take some summer profits and short this sucker again, and this year could be a doozy (spell check wanted me to replace with boozy, hmm) as it is the weakest start of a presidential cycle in a long time.
The Junk Bond Market topped in 2011, Commodities, as well, the Real Estate Market Topped in 2014, the Stock Market topped in 2015, and now we are seeing gold, U.S. bonds, and the dollar starting to positively correlate.
It is time to revisit with Mr. Exeter. He created a risk pyramid, that shows how investors cascade down from high risk to no risk assets as aversion and default gains steam.
I seriously doubt that the average market participant realizes the magnitude of the devastation that lays ahead. It is our human nature to project forward based on recent events – a common cognitive bias which can easily lead to painful losses during regular market conditions. But what we are facing over the coming weeks and months will register several standard deviations beyond current worst case scenarios, at least based on activity/pricing I’m currently seeing in the option chains.
In an age of Algorithms, High Frequency Trading, Quant-injected performance engines and every Casino Patron with an e-Trade account hyper-stimulating the market after each bit of news that is fed (no pun intended) to us by the financial media and Policy Central, the lowly individual can be forgiven for feeling small and vulnerable; for feeling as if the answers are beyond her, or that long-term success is out of his reach.
Indeed, this very publication has ground its gears pondering the fact that August-September market sentiment became historically over bearish in ratio to the relatively minor downside experienced thus far. That was a bullish, not a bearish thing. With sentiment now being repaired it is time to ask if we are giving the bulls too much latitude.
As we approach September 15, Shemitah talk is going to heat up (particularly if things start falling to pieces). You might enjoy this video; I got a particular kick out of it, since Stockhouse (founded by the chap featured below) was one of Prophet’s suitors back in 2004 when I was in the throes of selling my company. Of course, since 2015 is supposed to be a really big deal (7 times 7), my son asked me what huge event happened 49 years ago, which was the last “Jubilee”, in 1966. Ummmmmmm………not much. So maybe this is just another crock!