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The moment of truth for FAANNG stocks

October 22, 2018 / / No Comments

FAANNG stocks or Facebook, Apple, Amazon, Netflix, Nvidia and Google have been out performing the market for a good while. They’ve also been a on the radar of practically every perma bear in the market. Hard to know if they have shorted it before, but they were calling the top for a very long time. Unsuccessfully.

There are two dimensions that set a good trade, direction and time. They might get to claim to get the direction right, but their timing was totally off. I think now is the time to pay very close attention to the group as it could start turning lower!

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Sectors on the watch to short

October 19, 2018 / / No Comments

I’ve been bullish stocks for the past 2 odd years. But it looks to me a bigger correction in the US stocks could be upon us. Emerging markets have been under performing this whole year and there are no signs of a reversal yet (see Watch Alibaba for clues in emerging markets). Then the German DAX is just confirming the move down is very likely (see Winter coming?). And it looks gold could be starting to catch some bid (see Rotation to gold and miners?).

We saw a few failed breakouts higher in the US indices recently. I was writing about the Dow Jones Industrial Average, looking for a continuation higher. But it failed and that failed break higher, by the way a similar one happened in S&P 500, is causing concerns for bulls and all these developments are by no means constructive for stock bulls. 

So its up to everyone to decide what you want to do. You can either stubbornly hold to your longs, you can be defensive and go into cash or you can even short some indices, sectors and even individual stocks. But which ones and under what conditions?

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Rotation to gold and miners?

October 11, 2018 / / No Comments

It looks we could see a correction in the US stocks too. We’ve been seeing it in other markets already. I still think this could only be a correction within a secular bull market and I don’t want to be calling for a 2008 style crisis yet however it can always evolve into something bigger.

There is an interesting rotation happening right now though. Gold has been a mess in the past months and even years. Many were expecting it would start trending higher.  I was one of them for some time but I’ve put that thesis aside until now. I’m starting to see reasons for joining the party! What if this correction in the US stocks will ignite it?

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Winter coming?

October 11, 2018 / / 1 Comment

My DJIA post marked a (short term) top for US equities. It happens. As said the other day, it’s a low probability call. However things change fast and if you read my post carefully you’ll notice I also entertained a possibility that German DAX could be forming a major market top and added that if the price of DJIA gets below 26,400 we want to be defensive.

And man, being defensive was the right call. Or short of course one could say. Stock indices were crushed yesterday with Nasdaq 100 down almost 4%. Other indices were no exception to this selloff.  So, my main question is, is this the start of a something bigger?

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Generational shift

October 5, 2018 / / 2 Comments

In the beginning of 1980s interest rates and inflation started to trend lower. They have trended lower ever since and they got to levels never seen before in the history of mankind. It feels that we have forgotten they could ever rise again. Inversely the same is true for bonds. But I think we are witnessing one of the greatest generational shifts that are happening right in front of our eyes.

What if interest rates and inflation are about to rise for the next 3 decades while treasury bond bubble is about to burst with bond prices trending lower in the same period?

Most media don’t even cover this topic. They’re too focused on clickbait stories. I covered this topic last September in But aren’t bonds supposed to only go up? and three weeks ago in Bond breakdown? posts. But it’s so important I need to give you another update.

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Dow Jones Industrial Average: stocks are going up!

October 3, 2018 / / No Comments

So many guys are trying to call the market top in an up trending market. Sure, any swing top could be the top, but calling the one is a low probability bet for obvious reasons. Usually major tops are a process and they need time to develop. For example one could argue that German DAX is currently forming a major market top. We’ll see if that will be the case. But there is no sign of a major market top in the US stock indices yet.

And DJIA closing at a new all time highs, surpassing this January’s high, is anything but bearish. Breadth indicators are also not telling a bearish story. And what if there is a bigger risk of a melt up, rather than an imminent crash?

I wouldn’t exclude this case and neither should you. Sure, stock market is in the later stages of a bull market in my opinion, but does this mean it should crash? If it does, I won’t be stubbornly holding to my holdings. And before we see any serious deterioration it’s hard to join the doom and gloom side. When that happens I will be more than happy to short it.

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Energy to start outperforming?

October 1, 2018 / / No Comments

I can’t help it but I need to write yet another energy post. It’s hard to be bearish energy in general if oil continues to trend higher (see here) and if US natural gas is just breaking out of a major bottom (see here).

But I promise I’ll try to make this post shorter. I’ve already written about the futures market so let me focus on equities now. My main question is, could $XLE energy ETF start outperforming broad based S&P 500 index?  

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