Financial News vs. Noise
The path of least resistance continues to the upside, but it’s not being led by the Magnificent 7 at the moment. Friday, 5 of the 7 closed down. All of this makes sense, the divergence we have seen for most of the year cannot continue forever. I still think you buy Magnificent 7 stocks on dips, and I bought GOOGL and META on Friday, but the real money is going to be made elsewhere. The only question is how long that lasts. Overnight the big news is Bitcoin as it is rallying past $40k.
The implied probability of a 25bp cut at the January FOMC meeting is now 16% while the probability of a cut on March is now 60%. At some point, whether this happens or not is going to be a big deal.
All of our themes on the long side continued to work on Friday—Gold and silver miners, solar, GEO came back a bit, and AA is starting to move.
I really think the “stuff” stocks as they call them are going to be the place to be. Again, the question is for how long. A lot of the other names in the industrial metals are extended though. In fertilizers I really like the look of the CF chart, will be watching this one today.
Lithium is another area that isn’t extended.
Maybe coal. However, John Kerry did call for the end of all coal plants at the climate summit.
An area I used to watch all the time was shippers, then I took my eye off and they have ramped recently. ZIM used to be one of my favorites until it got absolutely mauled. Turns out it was the only shipper not to move so I was able to grab it on Friday.
I did end up going back into China and ended up taking NIO, short leash and earnings Tuesday. In a note this weekend Johnathan Krinsky at BTIG calls China the ultimate contrarian idea for 2024.
The high short interest names have also been the place to be so I would be watching the names that haven’t participated as much as social media is starting to talk about them now—HOOD, BYND, and AI.
Biotech is another area that has been strong, will be watching XBI today.
Oil had another crazy day on Friday. Up big and then down big again. Sometimes it’s better to be lucky than good as I got out of my oil position near the top of the day. The question that I don’t have an answer to is whether or not the oil market is trying to tell us something. Of course the oil names are the only stocks that aren’t totally extended.
On the short side I think you need to be careful. I continue to be short RILY, AX, and TD. Not thinking of adding anything at the moment and probably won’t stick in TD that long. I do think RILY and AX could end up being zero’s but my friends at Brendan Wood tell me the issue with TD is the CEO, not the company itself. Keep in mind though that I do continue to have a VIX call spread and I run a strategy where I pretty much have SPY puts every night, so I don’t need to have much on the short side.
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News vs. Noise
Dow near record high because traders are calling bluff on ‘higher-for-longer’ Fed-MarketWatch
Powell, in a speech at Spelman College in Atlanta, said it would be premature to speculate on when policy might ease, while repeating that the Fed remains ready to raise interest rates if needed, as it works to bring inflation down to its 2% yearly target.
For now I think it will. Just remember what this fund is, and what ARK is. The media is going to want to find the next superstar investor, don’t fall for it. Cathie Wood’s ARK Innovation Had a Blockbuster Month. Will the Good Times Last?-Barron’s
This is not the reason why. I started out using trend following strategies. You used to be able to move very slowly as trends took a while to play out. Everything happens much more quickly now. You can exploit momentum as an individual, but funds are not going to want to move as quickly as needed. Momentum Investing Has Struggled for 20 Years. Here’s Why.-WSJ
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