fbpx

Time for a value play

I keep reading news that this stock market is over extended and we’re due for a major correction as if we didn’t have one just 12 months ago. It’s really hard to escape this trap, especially for a retail investor. People always find something why this market has to go everywhere but up, and if you present them some positive arguments, such as improving breadth worldwide, sentiment, not to mention record stock outflows among many others, they just disregard them.

In the previous post, Continuation of strength, I was focusing on the outperforming regions and sectors, those that continue to be in an up trend. Some are real beasts, such as health sector or $XLV ETF. In this one I’d like to present two value ideas that could start catching a bid after years of under-performance.

Read More

Continuation of strength

This time around last year I was warning that we could get a stock market sell-off into year end. How right it was to be selling stocks ahead of it. Many investors were caught off guard and became, consequently, very negative and fearful going forward. Despite the markets having rebounded nicely since then, sentiment didn’t change much even though we’re just starting to see breadth expansion with more and more breakouts higher out of roughly two year long bases, see Are you ready for a stock market rally?.

So, what if this year will be the total opposite of last Q4? Meaning, could we see a broad based rally into holiday season? Let’s dive straight into it.

Read More

What does this surge in Bitcoin price mean?

We’ve seen a very strong move in Bitcoin this Friday. The price moved up by good 16 and a half percent measured from the opening to the closing price. However, the move continued into Saturday and in less than a day, measured from low to high, rallied by almost 40 percent. Let’s try to put this into perspective and answer a couple of questions. For example we are interested how does the magnitude of such a move rank since 2010 and what does this mean for future expectations.

Read More

Are you ready for a stock market rally?

Most are not. Well, except buy and hold crowd. And sentiment is reflecting that. Many sentiment measures and indicators are, with some variations, showing that people are sceptical about future expectations at best, where majority is very concerned and some are expecting a 2008 crisis style repeat.

I was talking to a director of a company the other day. Their business is closely linked to German industry, so he’s feeling the numbers coming from there. What fascinated me most was not his outlook, but the conviction he has. He’s absolutely sure we’re going down, there’s no doubt about it. He was pounding the table the markets will crash and not one single person could prove him wrong. Man, the conviction level was mind blowing.

If the meeting’s circumstances would be different, I’d invite him to take, under some conditions, an opposite side of a trade with me.

It’s hard to deny the current weak economic data coming from different parts of the world. There’s no doubt we are/were seeing an economic slowdown. However I’m trying to be open minded and am wondering if this was it, if data is about to start improving contrary to the popular belief that it’s going to get drastically worse.

Read More

Dollar entering a secular bull run

I’ve been in the dollar bear camp for quite some time. It’s not hard for me to admit that, as things stand as of now, my view has been wrong. It’s nothing wrong with that. What would be wrong is staying stubbornly in a position and doubling down despite the facts proving me wrong.

I recently wrote a post FX markets about to get interesting again! where I argue that despite the path currencies may take take, there is one that’s most likely. That is a path of higher volatility. Now I’d like to update you on the topic. In this post let me show that the dollar could be starting a new secular bull run.

Read More

FX markets about to get interesting again!

I haven’t been focusing on currency markets much in the past year or so and there’s a good reason for it, volatility. Rolling 30 day standard deviation is sitting at 15 years lows, in some pairs even lower. This is very well reflected by charts where we can see multi-year consolidations or sideways trends, however you want to put it. I don’t know about you, but I like trending markets, and most currency pairs have not been trending in years.

It feels, however, times are about to change. Volatility could increase soon thus making FX markets interesting again and when volatility does increase everyone will go on about currency wars or some other thing to justify their narrative.

Let me start with showing you a volatility chart of individual pairs going back 15 years and continue with an overview of some majors.

Read More

Major inflection point: recession or melt up?

So many guys have been pounding the table with doom and gloom calls for so long but they were dead wrong. When the market finally turns down they’ll likely pat themselves on the back and say they weren’t wrong, just early. As PLB rightfully says if you get direction or timing wrong, the trade is wrong. This is one of the most important aspects of trading not understood by most.

The market has been trading in a range for the past 18 months where SPX has been between 2,550 and 2,950 with a short trip to 2,350 last winter. All this time we’ve been hearing bad news about trade wars, tariffs, Brexit, growth slowdown, earnings recession etc. Stocks have been creeping higher despite all of this and are sitting just below all time highs. If you’ve been trading the non price related data you’ve been most likely losing money and are eager to short this bad boy yet again, right?

Read More

Risk on

When reading financial headlines one could easily think the markets are selling off, we’re in a in severe downtrend where panic is just about to hit the main street. It’s really hard to find anything positive, and even if we get to read something that could sound a bit optimistic it’s accompanied by a word of caution, caution ahead of the next recession. Everyone’s obsessed about it.

I don’t know about you guys, but I like to stay open minded and being optimistic is a viable option too. It helps spending some time with family and friends during the Summer, and having the Adriatic sea at our fingertips is just a bonus.

Since the beginning of the year we’ve been bullish the stocks (Is it over?), bitcoin (Are cryptos trying to bottom?) as well as gold (Will gold bugs finally have their day?). It’s a ‘risk on’ environment, you know. However, is that about to change?

Read More

How will the dollar affect stocks?

I guess everyone knows the saying ‘fool me once…’. The market tries to fool us not once or twice, but much more often. If it was straight forward, risk management wouldn’t be as important as it is. In fact, it’s the most important aspect of trading in my opinion. I believe finding the best opportunities and making the most money out of them starts with great risk management and not other way around.

In a recent post Dollar about to rally? I was exploring the dollar bull thesis. Frequent readers know that I’ve been a dollar bear for a long time now, and exploring the opposite side of an investment thesis is a must if you want to manage risk effectively. While the dollar is still in a sideways trend, last week turned the table in favor of dollar bears once again, which is my preferred stance. But why is this important and how could this affect the stock market and economy?

Read More

Will gold bugs finally have their day?

Last October I’ve started noticing some positive developments in gold just when stocks started to correct into Christmas eve’s bottom, see Rotation to gold and miners?. Since then it’s been firming up for possibly something bigger.

I’m not one of those gold bugs who’ve been advising to hold gold in the past almost 10 year long bear market. I don’t believe in some idealistic ideas with potentially huge opportunity costs. But when I see a good opportunity I try to grab it with both hands.

Read More
%d bloggers like this: