Quarterbacks preparing for the snap are usually able to read the defensive alignment and have a pretty good idea how a play will unfold. Likewise, contrarian investors preparing for the next play are usually able to ‘read’ global fund positioning (relative to historical trends) and have a pretty good idea how the following quarter will unfold.
For the purposes of this post, let’s focus on five asset classes: Cash versus Equities, the US Dollar, and Emerging Markets stocks versus US stocks.
Global fund positions in October 2016:
Thus (based purely on sentiment) no surprise that over the past several weeks: (i) risk appetite increased, (ii) the US Dollar spiked, and (iii) Emerging Markets pulled back while US stock indexes soared.
Global fund positions in late November 2016:
Over the next few weeks, we're likely to see: (i) a (somewhat muted) continuation of the 'risk on' trade, (ii) a decline in the US Dollar, and (iii) a pulllback in US stocks against the backdrop of renewed interest in Emerging Markets.
Not sure I agree with the last part...well, I guess if its a matter of a few weeks then maybe. Longer term I think we see a continued rising dollar. The dollar has been acting similarly to the 1998/99 phase which saw a backtest but ultimately much higher levels in the dollar.
ReplyDeleteI think China becomes a problem yet again in Q1.
Also I noticed a few things:
(1) Extreme Greed readings in CNN Fear and Greed index:
http://money.cnn.com/data/fear-and-greed/
Like you said above, sizable drop in cash positions vs 2 months ago:
http://ei.marketwatch.com//Multimedia/2016/12/16/Photos/NS/MW-FC255_BAML12_20161216150802_NS.png?uuid=58fcce00-c3cb-11e6-a86b-001cc448aede
I do like Europe after we get through the Q1 correction. I'm positioning for a correction.
I'm only really slightly positioned for a fall in China and hoping that spills over a little bit into the US market. It seems like the market is set to continue gains over the longer term with the only headwind being sentiment.
DeleteBig Short Guy taking a similar approach to me - can't see the video as CNBC Pro:
ReplyDeleteAppearing on CNBC, Steve Eisman - now with Neuberger Berman - says a "golden age" for financials is at hand, with less regulation and more leverage to come under a Trump administration.
He's "as long as I can be," and says banks and life insurers are set to benefit the most.
Signs of trouble have emerged from China's credit market, but country-specific ETF's are not pricing in contagion risk to equity markets, according to a Credit Suisse Equity Derivatives commentary. China's 10-year yield shot up 70bps since the US election to a one-year high, but implied volatilities on the iShares China Large-Cap (FXI) and X- Trackers Harvest CSI 300 China A-Shares ETF's remain near one-year lows, the note says. Three-month skew for FXI is in the 9th percentile, indicating very little demand for downside protection, states the note. Credit Suisse recommends buying puts, or bearish contracts, in Chinese equity due to the risk of "further escalation in China-US tensions (especially given Trump's anti-trade stances)."
ReplyDeleteDeutsche Bank AG (DBK.XE) is set this week to settle a claim with U.S. authorities over the bank's alleged misselling of mortgage-backed securities in the run-up to the financial crisis, according to Reuters (http://www.reuters.com/article/us-deutsche-bank-mortgages-settlement-idUSKBN1481I8?il=0). A source told the news outlet there is a good chance Deutsche Bank will reach an agreement with the U.S. Department of Justice before Christmas, possibly as early as Wednesday. The source also said the bank is set to pay a penalty well below the $14 billion the DOJ initially demanded. The justice department in September asked the German lender to pay $14 billion to settle claims connected with the bank's issuance and underwriting of residential mortgage-backed securities between 2005 and 2007. At the time, Deutsche Bank said it had "no intent" to settle "anywhere near the number cited." A representative from Deutsche Bank declined to comment on the report.
ReplyDeleteI'll be looking to buy back into DB this week.
Picked up FCX at $13.48
ReplyDeleteMan FCX is weak. Might just wait for the inevitable crash to $12 to fill the gap.
DeleteI took FCX off. Just gonna wait for some panic selling. Its not here yet but the crowd is getting restless.
DeleteSold YANG at $16.89
ReplyDeleteThe copper chart shows a clear top, and who knows how much it is going to fall now. If people realize that Trump will not be able to raise money (especially with his tax cuts!) to build all of that infrastructure, then copper may fall all the way back.
ReplyDeleteI just exited my position in BHP at a minor loss -- all metal miners are going down.
PnF Chart target is $48 on BHP
DeleteAt the same time, JO is holding up. I just placed a buy stop limit order for more JO at $20.85/20.90, just above the recent intraday highs.
ReplyDeleteI bought back into FCX into the close at $13.54. More I thought about the short term movements in China, the dollar and the seasonally strong period we're in, there's probably a bounce due here soon. If China bounces then FCX does too.
ReplyDeletePnF target is $28 on FCX. That would be something.
DeleteI typically don't put much weight into those PnF charts but it completely nailed the move in the Russell 2000. I was buying TNA around $45 in the spring and the target for the RUT (when the RUT was at 1050) was 1385. It hit 1392 two weeks ago.
Got an email today from a chinese supplier. "We need to produce your goods at night because smog is so bad it is like fog and government is shutting down production. So we produce at night secretly."
ReplyDeleteWow - that's incredible. Must be horrible living there if you have any breathing issues at all.
DeleteYeah I feel so bad for them
DeleteLong tza 19.13
ReplyDeleteSold FCX 13.8
ReplyDeleteAdded more tza 18.95
ReplyDeleteDoh should have taken the gains. Sold at $18.88
DeleteLong ACIA $66.69. Stop below $64. Best revenue/EPS growth in the market and cheap valuation, if it continues. I like the setup here on low volume.
ReplyDeleteNaturally, BHP bounces as soon as I sell it. But had I not sold it, it would not have bounced!
ReplyDeleteThat's correct, David. One of the metaphysical laws of the trading universe!
DeleteI'd rather make money on the NMM bounce. :) Placed a buy limit order for more NMM at $1.40.
ReplyDeleteSold ACIA this morning at $66.9 and bought DB at $18.8, bad timing on both.
ReplyDeleteAnyone have any plays on China pollution? Only one I can find is CCC
I bought some TWLO this morning on the news of the AMZN partnership at 31.8. This company has intrigued me as a cloud play for a while...AMZN is essentially validating TWLO technology by expanding service. TWLO at 7x EV/S is not that expensive given the growth potential
ReplyDeleteBDI is ticking up according to http://www.dryships.com/pages/report.php
ReplyDeleteJust bought more NMM at $1.47 and a little of GNK at $7.35.
Sold TWLO at $32.9
ReplyDeleteYikes should have held TWLO
DeleteWow. Nice trade nonetheless.
DeleteI think there’s a good chance Mike Pence is not a human being
ReplyDeleteBought back into CBI after hours at 35.35.
ReplyDeleteFedex will always have a special place in my investing heart
ReplyDeletehttp://m.huffpost.com/us/entry/1966837
I took a hit on CBI and tried TWLO again today and took a hit.
ReplyDeleteTrump now talking about Nukes on Twitter. Sticking to the sidelines as this euphoria fades
"The United States must greatly strengthen and expand its nuclear capability until such time as the world comes to its senses regarding nukes"
DeleteLong SOXS. The SOX is now 25% above its 200 DMA after an extended run. Gap up today after MU earnings.
ReplyDeleteLong $10.34. I wouldn't be surprised to see a nice run in this over the next few weeks.
DeleteAlright...I'm stepping aside. Sold at $10.25. Oh well.
DeleteStopped out of JO. Instead, decided to buy more GNK: BDI is positive for a second day in a row, and it has a high tendency to continue moving in the same direction. NMM is already responding to this fact, and GNK will likely respond soon.
ReplyDeletePlaced a sell limit on GNK at $8 (was purchased at $7.07).
DeleteBought some more HLX at $9.34. Placed a sell limit at $10.
ReplyDeleteDecided to sell now at $1.55 half of the NMM I purchased yesterday at $1.47, and placed a sell limit at $1.65 for the other half.
ReplyDeletePicked up some URRE at $1.4 on pure speculation off that Trump tweet
ReplyDeleteUranium prices in the basement...any rally would be a positive obviously:
Deletehttps://www.cameco.com/invest/markets/uranium-price
Why are shippers not exploding??? BDI is up for the third day in a row, making it very likely that a new uptrend has begun (BDI tends to move in the same direction for a long time).
ReplyDeleteBought some more GNK at $7.07. Its 1-year chart shows that it has a tendency to bounce off the previously established support levels. It is now back to where it was before the mid-December bounce, and given that BDI is trending up, a move up from this level seems to be more likely than a move down.
DeleteMerry Christmas fellas!
ReplyDeleteSold URRE for scratch and sold CF for a nice little gain. Bought back into FCX at $13.9
I sold that DB last week for scratch as well and am still waiting to get back in. I'm praying they do a secondary and it drops to $16's.
ReplyDeleteBought some EMES at $12.13. they sell sand used for nat gas fracking. Nat gas on tear and their competitors SLCA and HCLP are running like crazy...I think it catches up
ReplyDelete