Financial News vs. Noise
I was fully expecting to write a bunch about gold yesterday. When futures opened on Sunday gold spiked over 2%. The narrative was about a US ship getting fired on, which didn’t make a lot of sense, but when you are long gold miners who really cares. I woke up Monday morning and was shocked to see gold flat, which I would have been ok with, but gold then proceeded to sell off and crush the miners along with it. With gold miners it is always better to buy when nobody wants them and sell when everyone does, so I bought more yesterday. Today looks better but it’s early.
To add insult to injury, all the “stuff" stocks I figured would lead the market sold off as well. Considering the market also sold off I guess that’s not much of a shock. The only areas that did well were bitcoin miners , airlines, pot stocks, biotech, and regional banks.
On the plus side, money continued to flow out of the Magnificent 7 into other areas. Every Mag 7 name ended in the red. If this is going to be a real rally, which I think it will be, at least until year end (until people start wondering about those rate cuts), then it can’t be just 7 stocks. It’s also healthy for the market to sell off from time to time, or else it just goes in a flat line and nobody makes any money. The best buying opportunities always come on pullbacks in an overall bull trend, so I did some buying. I added more beaten down Mag 7 with NVDA and MSFT. I also added RRC in energy and VALE in metals. I also used weakness to go long the Yen (FXY).
The NDX has now reaching oversold levels (I like to use a 4 period Connors RSI which StockCharts doesn’t have, but it is nearing oversold using regular RSI anyway).
Doesn’t mean it can’t get more oversold, but given the strength of this rally there is good risk reward being long.
I think the strategy remains the same, look for stocks and areas that haven’t participated as money will flow there if this rally continues to broaden out. I would also be looking for highly shorted stocks that haven’t ramped. HOOD was a name I mentioned yesterday. Closed off the highs but up again nicely in the pre market.
BYND was another name I mentioned but it took off too fast out of the gate and I didn’t want to chase.
Out of the stuff stocks my favorite continues to be AA, which pulled back but didn’t violate any key levels.
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News vs. Noise
Profit taking seems way to simplistic of an answer. I did add yesterday, but did it with options in such a way that if the miners go down there is a good chance I break even. Why gold prices retreated after touching an intraday record above $2,150 an ounce-MarketWatch
This is one of the few guys who got this year right, but what we have seen a bunch of one hit wonders. Stock market will struggle to rise by more than 2% by mid-2024, says Stifel’s Bannister-MarketWatch
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