Arun S. Chopra CFA CMT
The big story last week was obviously the declines in software and momentum stocks. The big story for the year has been the bond market and overall move in yields. With the steep decline in rates in the US and the move to negative rates abroad, there has been a lot of confusion in equity positioning and market outlooks.
Today I will walk through the move in bonds, and the specific relationship to software and momentum names, as well as how (and why) I saw a lot of these breakdowns setting up in advance. I will primary focus on the making of, and thinking behind this trade in general, and conclude with some charts on the stocks themselves.
This will not be a larger investment outlook on the space or the stocks themselves but more of a review of how I believe we...
Arun S. Chopra CFA CMT
Again, these articles are designed to help show a multidisciplinary approach to stock trading, investing, and position management. Let's jump right in.
It all started in June when the crypto market cracked and was down over 60%. There were numerous analysts at the time who tried to claim this would not impact the semi space. I took a different view, especially given what we were seeing with the broken trendline in the semiconductor index.
Readers of my work know I like to look for intra-market relationships vs. strict fundamental narratives. In Micron's case it was the auto index that was diverging dramatically, and in Netflix'...
Every now and then there's a trade that really opens up an opportunity for a conversation about fundamentals, price action, and behavioral finance. Turns out Micron (MU) was just that stock in 2018.
I am sure Micron is big favorite here at Seeking Alpha. It has all the parameters I assume the bulk of readers care about. Strong cash flows, demand as far as the eye can see, large cash position, a PE of under 5.
Today I want to provide a different view on the stock rather than the traditional deep value, fundamental can't lose bet.
Now, many are going to say the decline is due to China, or DRAM pricing, or any other host...
Arun S. Chopra CFA CMT
A deeper dive into credit and dollar dynamics.
After calling for major breakout last year in "The Melt Up", I switched to a much more cautious stance as the calendar turned over. There were four major factors coming into the year I was most concerned about. I often see laundry lists of concerns; I have found that somewhere between pointless, redundant, and confusing. The following four however lined up perfectly and were powerfully simple (no particular order).
It was these four reasons that I stayed balanced in 2018, with 65% equity exposure on average all year, with much of that long/short. As the year has progressed, the above framework...
In February I wrote an article titled '3% doesn't matter'. This was about two weeks after the market hit its peak with respect to the overall rising rate fear.
There were 3 primary takeaways from my initial article.
Today I will review the 2016-2018 cycle in yields, including price action, sentiment, and the impact to specific sectors. I will then take another look at where we stand overall on the 10-year treasury yield today.
I've been consistently quoting Gundlach's comments on the value of technical analysis from a few weeks ago, more...
Since I wrote Intel, the 15+ Year Breakout, on December 6th, the stock has zoomed, up over 22% vs. the market which has essentially gone nowhere. In fact Intel (NASDAQ:INTC) has been the second-best performing mega cap since that time, only bested by Amazon (AMZN).
The article initially was supposed to be about my latest "fundamental factor" strategy, "earnings yield" stocks, which is one of eight factor models I run.
The Intel analysis was rooted in two more simple 20-30K foot concepts surrounding this most recent model, and I chose it because it was one of the bigger names out of my list. The hope was it would provide a good template for the strategy I was so excited about.
Basically this was the premise at the time:
Let's first look at how we got here...
The most common chart being published on tens looks like the following 3 (please note they are not my charts; they are simply others I have come across in a variety of mediums). I have purposefully blurred out any contributor information as that isn't my game. This is about trying to be on the right side of the market, period.
Chart 1. The 3% resistance Level
This is the market's new bear 'hope'. 'Rising rates are about to break a 35-year downtrend and 'crash everything'. For that to happen however, the chart has to match the narrative,...
See how Fusion members were in front of the move.
So the market is melting up....
Yes, we have all heard the term in the past 4 months or so. So much so that I saw a lot of perma bears dismiss any possibility of higher prices - instead, they saw further proof of a suckers' rally and an eventual crash.
But nothing could be further from the truth. Just because the search term went trendy is hardly a reason to dismiss it. Especially in the later stages of a bull market.
I've written a lot about the differences between this market and past overall peaks, particularly '08. One of the most important conditions has obviously been monetary policy. This is part of the reason I was able to see the early 2017...
Investing vs. speculating in a boom/bust system.
In all my years in finance, I've never seen anything like this, particularly on the upside. The data says no one has.
Before I get started, let me say I am not a crypto hater. As a former gold bug during 2005-2011, the goal of decentralization is well understood. I know what I need to know about these vehicles and wrote about the boom to technicians this market has provided in my past article Cryptocurrency Charts!
With that said, on to the bonanza...
Technicals get mixed reviews. On Seeking Alpha, it seems to be a lukewarm sorta deal. Which is great, in the end it's highly subjective. I'd argue so is fundamental valuation, but that is for another day.
Technicals can, however, tell us a lot about emotions. This...