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The March 23rd Low

Uncategorized Jun 14, 2020

Arun S. Chopra CFA CMT

Hi Everyone,

After highlighting my move to safety in February  (The Move to Safety), I thought it would be a good time to review the signals and tools I used to see the bottom in March. The key point today is not only anticipating market environments like we've seen, but having tools to profit from them. 

Last week I came across this tweet by Meb Faber and it reminded me of the insanity we've seen not only during the recent rally but really the past 12+ months.

In the face of all that, we still saw an over 40% rally in stocks, which to an extent comes with the territory, but definitely more aggressive than anyone expected. 

Obviously the...

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The Fed Pulls The Punchbowl

Arun S. Chopra CFA CMT 

November 2018

  • Markets come under pressure as the Fed pulls the punchbowl.
  • A look at how to monitor liquidity across equity markets.
  • Why and how I shorted NVIDIA and Netflix near their peaks.

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).

  • Proprietary exhaustion indicator fired in Jan., first time since 2014
  • Election Year Seasonality
  • Fed Policy
  • Trade War

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...

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3% Treasury Yields Still Don't Matter

Arun S. Chopra CFA CMT
June 2018
  • In February I argued the rate move was overdone.
  • At the time many assumed rates were breaking out.
  • How price and sentiment help determine future price action.
 

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.

  • Rising rate concerns had hit a fever pitch
  • 'Bad' charts were being passed around everywhere, artificially adding fuel to the fire
  • The correct interpretation of yields showed a healthy rotation and/or normalization process

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.

Price and Sentiment

I've been consistently quoting Gundlach's comments on the value of technical analysis from a few weeks ago, more...

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The Twitter Turn

Arun S. Chopra CFA CMT

May 2018

  • After falling 80%, Twitter has more than doubled off the lows.
  • What can we learn about this entire cycle, from IPO to today.
  • Bringing fundamental, technical, and behavioral factors together.

After being crushed since going public, Twitter (TWTR) has more than doubled off the lows. I wanted to spend some time looking at the entire cycle as there is much to learn from it in my view of it. Today, I plan to touch on valuation, charts, management, and a little behavioral.

Today's agenda:

  • TWTR, GPRO, SHAK, OTCPK:HMNY, and the dreaded Doji (Technical)
  • Financial Gravity (Fundamental/Behavioral)
  • Stock compensation issues (Management)
  • The Twitter Turn, bringing it all together

For those who know my work, I've often written about IPOs, pump and dumps, overvaluation, absurd reason, and bubble logic. So that's where I'd naturally like to start.

TWTR IPO

When Twitter came public in 2014, I was skeptical to say the least. Here we go again I thought. 25B?...

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Intel: The 15-Plus Year Breakout - Part 2

Uncategorized Apr 28, 2018
Arun S. Chopra CFA CMT
April 2018
  • Price has zoomed 22% since the original article.
  • A look at why.
  • A deeper conversation into longer term price action.

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:

  • Earnings yield model (upper panel) shows a name with significant outperformance potential, in this case...
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3% Doesn't Matter

Arun S. Chopra CFA CMT
February 2018
  • Everyone is talking about 3% on Treasury yields as a line in the sand
  • The most common long-term yield chart being passed around is flawed.
  • A look at the correct Treasury yield channels.
One of the most passed around charts in the last 2 months has been the ten year Treasury yield chart. Supposedly we are on the cusp of a major breakout in yields.

Let's first look at how we got here...

Chart Malpractice

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,...

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The Bitcoin Bonanza

Arun S. Chopra CFA CMT
December 2017
  • Bitcoin has had a historic run.
  • The time to buy was the breakout of the downtrend in 2015 and close above 300.
  • Fear and greed are the two most powerful market forces.

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...

Chart Watching

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...

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Intel: The 15+ Year Breakout

Uncategorized Dec 06, 2017
Arun S. Chopra CFA CMT
December 2017
  • Intel recently broke out of a large multi-year base.
  • There's a lot of concern over another 90s market, or a 2008-type event again.
  • A quick glance at earnings yield measures shows three very different markets.

I recently wrote a bit about the differences between the 90s and now in my article 'The 90s Called'. In it I discussed the 4 prior major tops ('29, '74, '00, '07) and the 4 key indicators I follow to warn of a potential top. The equity risk premium is a very common measure of overall valuation and one that I continue to monitor. Generally, we see the ERP go negative in the euphoria phase of a bull. A good argument can be had with respect to if we will see a euphoria phase this time around, but that's outside the scope of this article. What I wanted to do was look at the current market, Intel (NASDAQ:INTC), and how this type of analysis is driving my latest 'Fusion Strategy'.

Below is a chart of the earnings yield on the SPX vs. the...

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Macro Correlations

Arun S. Chopra CFA CMT
September 2017
  • Macro correlations are an area of particular interest. The more important ones happen in currencies, interest rates, and commodities.
  • A look at how long-term technical patterns can key us to macro shifts.
  • An in-depth look at the yen's influence in this and past cycles.
  • A look at a current scenario.

Macro correlations have been a particular interest of mine for a long time. This includes common concepts of intermarket analysis to some of the more unique relationships that can come and do often go.

Although many claim that today's managed atmosphere has rendered a lot of these relationships useless, I beg to differ. Markets move in trends, and when large trends change, asset class relationships will change as well, creating durable opportunities. Some are easily explained by economics, others simply are what they are, market phenomenona.

Some are likely happenstance and spurious at best, but by using longer-term technical analysis, some...

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I Am Shocked, SHOCKED, To Find Gambling Is Going On Here...

Uncategorized May 17, 2017
Arun S. Chopra CFA CMT
May 2017
  • SNAP and TWLO surprise fad stock chasers again.
  • This is nothing new something we've seen all cycle long.
  • A look at value vs valuation, lose-lose stocks, and mass media psychology.

This past few weeks we've seen some impressive 'misses' and subsequent stock declines. I often get asked about these 'fad' stocks, so I thought I'd put some of my past thoughts down.

Snap (NYSE:SNAP) and Twilio (NYSE:TWLO) have quickly put the game of ridicule, bubbles, and the associated denial back in full focus. Every time these events happen the market seems to shift between an 'told you so it's a bubble' narrative vs. 'this is part of the long term process of how growth stocks work' rationalization. But are either right? I'd argue not necessarily (certainly not the latter), but rather a process we see of 'valuation, investing, and overall gambling' that just confirms the nature of fad stock chasers. These common mistakes likely happen more in bullish/bubble...

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