The Island Reversal is a rare but important pattern that has shown up across many of India’s Major Indexes this month. As a result, I want to use this post as an educational opportunity to highlight what this pattern is, as well as explain how we’re interpreting it in today’s market. [Read more…]
Bonds Could Be The Catalyst To Take Stocks Much Higher
There are tiny little irrelevant markets everywhere like Pot stocks and Crypto Currency. These could disappear tomorrow and it won’t matter. The sovereign wealth funds, hedge funds and other monster institutions that make markets move have to be in the bond market. They’re too big not to. So if you want an inside look at the money flow from one place to another, an intermarket approach really helps.
I’ve been a lonely stock market bull for most of this year. It feels like every time I’ve told people that I think we’re closer to the beginning of a bull market than the end, they think I’m crazy. That reaction has gotten me even more bullish. Not only does price continue to suggest we’re heading much higher, but sentiment and positioning points towards the same.
I’ve made the argument that Technology is going to take us much higher, as it is just now finally breaking out above the March 2000 highs. It took 17 years to digest those 1990s gains. We’re now just moving on. All that market cap getting going is one obvious catalyst that I’ve been talking about since last year.
Another big one has to be the bond market. If interest rates get going, selling in bonds is likely to continue. That money needs a home. Stocks and commodities are likely it. First, let’s see what rates themselves are signaling before making plans on what to do. Here is the U.S. 10-year yield. This month marks the 37th anniversary of the high in rates in 1981, about 5 months before I was born. I’ve known nothing but rising bond prices and falling interest rates: [Read more…]
Why Are You Here? Lessons From Wine Smelling Class
I started taking wine a little more seriously over the past couple of years. It’s been fun to learn about different varietals and the countries that grow them best. The geography is really interesting and it’s fun to go visit places like Tuscany and Bordeaux. The whole process has been rewarding in a lot of ways. When you’re at a nice restaurant, for example, you want to make sure you choose the best wine that’s going to work best with your meal for your specific palate at your individual price point. Being able to explain your preferences and have an intelligent conversation with the Sommelier helps you do that.
When I first started studying wine I quickly realized how many similarities there were between the wine world and trading. It’s crazy. The Court of Master Sommeliers developed what they call the Deductive Method. What you’re essentially doing is taking into account all of the characteristics being displayed and eliminating possibilities along the way. So for example, if the wine is white, you know it’s not a Cabernet Sauvignon or Pinot Noir. Then you smell it and taste it to further eliminate other varietals and work your way down from there. When we look at markets, if the stock is making new all-time highs, we know it’s not in a downtrend. Then we look at each sector’s momentum and relative Strength characteristics to further eliminate the weaker sectors from being potential suitors until we ultimately find the strongest stocks within the strongest sectors.
Sommeliers consider the color of the wine, the smell, the body, the flavors and a history of wine making to come up with a guess of what the wine could be and where it’s from. At our shop, we identify market trends, use momentum, relative strength, intermarket analysis and a history of market trading patterns to isolate a specific investment opportunity. Traders and Sommeliers are weighing all of the evidence knowing full well that it is based on incomplete information. We trust the process.
One of the weaker parts of my wine game is smell. It’s really hard for me to get those notes of grapefruit or freshly cut grass, for example, while it appears seamless for others. My fiancee in particular is really good at this part and it totally frustrates me. So last week I took a Wine Aromas class at the Napa Valley Wine Academy. I was really excited to learn how to smell better but the experience really just reiterated how bad I am at this part of the wine tasting process. [Read more…]
Some Thoughts After A Week In Texas
It feels good to be back in California. I just spent the past week in Texas, and before that I was in Toronto and Philly. I won’t be leaving the west coast for a few months and I couldn’t be more thrilled about it. I like it here.
When you force yourself to leave to computer screen as much as I do, you’ll quickly learn the value in getting away and then coming back to reevaluate everything you previously thought before you left. There is a lot of data waiting for you once you’re back at the desk. Is there enough data to change your mind or does it just confirm what you felt previously?
I spent last weekend, both Saturday and Sunday, looking through charts and enjoying the start of Football Season. At this point, College and Pro Football have each begun. Back when I lived in New York, this was my favorite time of the year: September and October. The weather is the best and everyone is back from their weekends in the Hamptons, Jersey Shore, Cape Cod or various other northeast vacation spots. The city gets going again. But so do the markets. [Read more…]
All Star Interviews Season 2, Episode 5: Mike Bellafiore of SMB Capital
There are few people in this world who spend as much time with active traders as Mike Bellafiore, who has been a Managing Partner at SMB Capital since 2005. I think his unique perspective on trading and traders themselves is the perfect compliment to a lot of the other guests that we’ve had on the podcast. In this episode, Mike talks about some of the qualities that he’s seen in the more successful traders as well as common mistakes he sees being made on the desk. Throughout the conversation, Mike gives us an inside look into the trading floor, how they separate traders into teams and the way the more experienced, proven traders help the younger up and comers. I really enjoyed this one! [Read more…]
Defining Our Risk In Precious Metals
A few weeks ago I took a look at the Precious Metals space from the top-down for Premium Members of Allstarcharts, concluding that despite stretched sentiment there’s very little evidence that suggests being long this space over the intermediate or long-term. With that said, today I want to discuss the developments in this space since then that have shifted the short-term reward/risk in favor of the bulls.
Book Profits Before You Burn Your Shoes
Fine. I get it. Businesses making political stances — whether you agree with the stance or not — rubs you the wrong way. And sure, aligning with a professional athlete at the center of a hot-button controversy only makes it more cringe-worthy for you. You’re entitled to that opinion and I support your right to voice your displeasure. But for the love of all that is sacred in the world of trading, do.not.let.your.politics.or.emotions.get.in.the.way.of.making.profitable.economic.decisions.
Just don’t do it. [Read more…]
[India Chart of The Week] Nearly 20% Upside In Tata Motors
After a more than 40% year-to-date and 60% 2-year decline, we’ve been eyeing Tata Motors on the long side for some mean reversion. For the last two months the stock has been range-bound, but the recent breakout has shifted the reward/risk in favor of the bulls over the short-term.
