Good morning, Slopers, and welcome to a new week, and a new month. If I was going to summarize my entire disposition toward my portfolio, it would be “Probably going to suffer a bit, but generally holding fast.” In other words, January was fantastic, particularly that last day, but the hundreds of billions of dollars of free “money” from central banks that have been announced will probably be able to prop things up for a bounce.
Having said that, let’s stroll through a few charts based on four-hour bars. That gives us a somewhat close-up view while still providing some medium-time perspective.
Let’s start off with crude oil. What is comic about this is that the moment Qasem Soleimani’s death was announced, everyone agreed crude oil was going to rip to triple digits (see red circle). That was, of course, the precise moment when shorting everything that had anything to do with the word “oil” was the right move. One of the true great contrarian moments in market history. It has done nothing but plunge since the missile attack.
My big success story in January was bonds, on which I was bullish. The breakout, circled, preceded a strong move, but I daresay there’s plenty of room for backing and filling. I am still long-term bullish on this, and patience may well be rewarded; the closer it gets beaten back to its trendline (which now represents support), the more enticing an opportunity it would be.
What’s key is the lows we saw in January for equities. In other words, time and again – – more times than I care to remember – – we’ve had a bit of a dip based on something or another (this time, of course, the virus), only to be followed by a new round of lifetime highs and endless intervention. It’s more than likely to happen again. But if it doesn’t, that’ll be a huge deal, because it means that the hundreds of billions announced over the past few days from the central banks will clearly not be working as intended.
Lastly, the failure of the bank sector last month was key. I watch KBE almost as closely as I do the ES. Yes, a bounce, perhaps even a big bounce, may be forthcoming (“We cured the virus! Honest, this time!”) But I’m banking on it being a good setup for new shorts.