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20% More Downside Coming in the S&P500

January 8, 2016 by JC

We’re down 9% from the all-time highs in the S&P500 and I see people acting like 2-year olds that just had their favorite toy taken away from them. “Markets in turmoil”…..really? Why, because the market is down 9% from it’s highs last year after rallying over 220% over the prior 6 years? Please.

If you don’t live in a box and have access to any data that came before tinder was invented, you’ll easily be able to see how perfectly normal it is for markets to go both up and down. As someone who looks at stock markets all over the world, commodities and currencies, I see things get absolutely destroyed all the time. Look at the British Pound lately, look at the agricultural commodities, [Read more…]

My Favorite Chart In The World Right Now

January 7, 2016 by JC

The global markets are a never ending puzzle that we’re all trying to solve. There is never a straight answer because everything is always changing. At different points throughout the never ending evolution of markets, I have what think at the time to be the most important chart in the world, or at least one of them.

Today I believe that we really need to be watching the spread between the U.S. 10-year Treasury note yield and the U.S. Treasury 2-year yield. With 10s currently at 2.18% and 2s at 0.99%, the spread is now at 1.19. This is has been cut in half, and then some, from last year’s highs of 2.61. Us market nerds call this a flattening of the yield curve.

Here is the chart of the 10-Year U.S. Treasury Yield minus the 2-Year U.S. Treasury Yield: [Read more…]

[Chart Of The Week] Consumer Discretionary vs Consumer Staples

January 6, 2016 by JC

Ratio analysis is one of the most valuable tools that we have as market participants. It’s important to recognize where money is flowing out of, and where it is going into. This is the case when it comes to stocks, bonds, commodities and currency markets. A lot of these ratios tell us what the institutional money is doing, which is what drives markets. Think about the long-only mutual fund managers as a giant cruise ship. It takes a long time for a cruise ship to turn completely around and go in a different direction. With the amount of money being controlled by mutual fund managers, it’s a similar situation. We can spot a cruise ship turning around very easily, because it takes so long. It’s not much different in the stock market.

Today we are looking at a ratio of the Consumer Discretionary Sector vs Consumer Staples. The reason this is important is because of the high correlation between [Read more…]

[Premium] Our Weekly Letter About The Current Market Environment

January 5, 2016 by JC

In this week’s members-only letter we discuss the following topics:

How Is The Santa Claus Rally Coming Along And What Does It Mean?
Which Markets To Buy Dips And Which To Sell Rips
How High Can Natural Gas Go?
Japanese Yen and U.S. Equities
Gold vs Copper Ratio Still Trending
U.S. Interest Rates and the Yield Curve Narrowing

[Read more…]

“Do Nothing” Is Usually The Best Answer

January 4, 2016 by JC

Most of us in the trading and investing universe have the freedom to buy or sell anything we want, whenever we want. Sure, there are some exceptions out there like long-only mutual fund managers that have to pretty much be fully allocated at all times or certain funds out there that have to follow a specific mandate. The majority of us, however, can do anything we want, even if it’s nothing at all.

How often do you hear someone on the TV or read in an article that the guru opining on the topic is suggesting that “doing nothing”, is the best course of action. It’s either a buy or a sell [Read more…]

[Chart Of The Week] The Expensive Opportunity Cost In Owning Bank of America

December 31, 2015 by JC

When calculating risk in a given trade or investment, I find that opportunity cost is often overlooked. Remember, it’s not just how much money you can potentially lose on a given position, it’s the opportunity to make money elsewhere that you are missing out on while that position remains in your portfolio. This “Opportunity Cost”, is the type of risk that we like to refer to as, “A waste of money”. Today I want to point out what waste of both time and money it has been to be in Bank Of America over the past 2 years. But things could be about to change… [Read more…]

Real Talk: Whipsaws Rule This Time Of Year

December 30, 2015 by JC

There is a lot of noise surrounding the period between Christmas and the start of the new year. Santa Claus rally this, end of 2016 predictions that, what worked this year, what didn’t….. The truth is, most of that doesn’t matter and is just a lot of air-time filling, click baiting noise. Sure, if Santa Claus doesn’t show up and the U.S. Stock Market doesn’t rally during the last 5 trading days of the year and first 2 of January, bad things tend to happen. Fine. But end of year predictions are always wrong and they’re just a sell side marketing gimmick that the financial media eats up and loves to promote. It’s just noise. As far as what worked this year and what didn’t – it’s too late now anyway, so who cares. We want to look forward don’t we? Aren’t we here to make money?

What we really want to focus on during this period of the year is [Read more…]

[Chart Of The Week] CRB Index Hits 42-Year Lows

December 24, 2015 by JC

As we close out 2015, one of the biggest stories of the year has to be the crash in Energy prices. The CRB Commodities Index is heavily weighted in Energy and, as an Index, has fallen over 20% this year now down almost 65% from its peak in 2008. Here is how I think we can profit from this in 2016: [Read more…]