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Trading the Trend

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Yes I'm just wondering what point we'll need to get to for an admission that virus data is now the leading/precursor metric to all the others.

Not being prickly - at what point do you go "ok it's now time to pay attention to virus data, not all the traditional indicators"?

Global markets are also in the toilet
 
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I think we have to wait for company earnings reporting before the market awakes from its inflated FED induced zombification. Even bad economic data isn't really moving the market much.
 
Lol there's even been a U.S market bounce since I made that last post XD

We'll see what it closes at.
 
over9k said:
Lol there's even been a U.S market bounce since I made that last post XD

We'll see what it closes at.
Click to expand...

The retail Robin Hooders buying the dips apparently. The large investment banks, like UBS, are cautioning their clients about buying into the inflated equity market.
 
Yeah the whole eurozone closed negative so we'll see. I'm up 3% for the night and climbing so I'm happy.
 
over9k said:
Yeah the whole eurozone closed negative so we'll see. I'm up 3% for the night and climbing so I'm happy.
Click to expand...
The DOW has been whipsawing between ~25000 and ~26000. The large companies start reporting in July, so it will be interesting to see how the market reacts.
 
I've mentioned a few times that virus data takes 2-3 weeks to show up from date of infection.

There's also the employment numbers on the 3rd of july which will apparently be far lower than the last batch due to a collection error last time around - not sure how true that is though as I haven't looked into it at all aside from reading it on bloomberg.
 

So it looks like we are heading for a perfect storm around early to mid July. Terrible company earnings combined with the latent effect of the terrible virus data.
 
So Monday morning and we have the market trading higher:



The Tech sector is obviously on fire (observe QQQ) however the Tech sector is growing in S&P500



We have some laggards. We also have this headline:



Which if accurate is a healthy development for the market overall (it is correct, this is something I follow closely).

From last week:



The trend is still on-track.

Earnings will add some volatility to the mix, but I dealt with this topic last week also: forward guidance. Everyone and their granny knows earnings are going to be disappointing. What counts (and has counted for quite some time) is forward guidance. Those that can in the future, will receive the love today.

There are some major macro-trends shaking out going forward, which I am paying attention to. Nothing that is around the corner so to speak, but trends that could drive the next 5yrs or so going forward.

COVID headlines



Remain irrelevant.

The initial target (obviously) will be the previous high of last week. The Bears will (probably) try and draw a line-in-the-stand at this level. We'll look at it later.

jog on
duc
 
Duc - at what point would you go "ok, time to pay attention to the virus data, not the traditional indicators"?
 
A lot of the ASX also tanked yesterday in response to the bump in virus cases in victoria. I appreciate that this thread is about USA, but it's food for thought nonetheless.

Also worth nothing that the stay-at-home stocks in the U.S are still gaining WAY above the market overall. Zoom was ~3.5% last night alone.
 
So just a little update.



First up this is simply my fluctuation gauge. You can see easily enough, the top band means the market is running hot and will probably have a pullback. Nothing to worry about. A healthy market. So how to differentiate a serious pullback to just a garden variety. Chart #2



Chart #2 looks for divergences. Note the major divergence before we plunged. Note the divergence right at the far right of the chart in late July 2019 and note the lack of divergence in the last correction that we had.

Therefore chart #1 indicates we are running hot. Chart #2 tells me just how much of an issue it might be. Chart #2 has a further 'fundamental' filter, which I update on a daily basis. When this chart flashes sell, you will always find confirmation on chart #2, sometimes a few days or a week or two later. I will always sell/lighten/hedge on the fundamental signal.

Currently the market is running red hot. There will be a fair bit of chop in the continuing trend, which will keep many out of the market or singing songs of doom. It could potentially be smoothed out somewhat by lagging sectors catching up to the red hot Tech sector. So for the moment: sit tight, trade the trend and do not be scared out of positions as getting back in can be tough when you have to buy back in higher than when you sold out.

jog on
duc
 
Some news (analysis):

Consider two sentiment polls this past week. Bank of America’s June Fund Manager Survey indicated a majority believe we’re still in a bear-market rally (even if the bear market has technically been erased). A weekly survey from the American Association of Individual Investors, meanwhile, showed expectations for stock prices to fall over the next six months outpacing expectations for stock prices to rise by about 2-to-1.

It makes sense that investors would be skeptical about how quickly the market has run from March lows, given that more than 20 million Americans remain unemployed, corporate earnings are collapsing, and coronavirus cases are back on the rise. But upside economic surprises over the past two weeks—mortgage applications hit the highest level since 2008, retail sales rose at the fastest pace ever, and U.S. businesses added 2.5 million jobs in May instead of cutting an anticipated eight million, to name a few—are even better than they look and offer at least some proof that the stock-market rebound was driven by expectations for improving fundamentals.

The point isn’t that economic data are improving; of course they are as the economy reopens. It’s about the magnitude of the surprises versus Wall Street’s expectations. Citi’s U.S. Economic Surprise Index, calculated daily to reflect data relative to expectations, is at about 75, the highest since the beginning of 2018 and up from minus-140 at the start of May.

While he acknowledges it’s possible that any forthcoming rise in profit estimates is already baked in, he says a revival in Wall Street earnings expectations would broaden confidence that the U.S. economy has started a new expansion and that the recent stock-market rally is the beginning of a new bull run. This, Paulsen says, should alleviate what he calls a central fear that the stock market is highly overvalued.

To that point, Paulsen went back over the past three decades to find that the current price/earnings multiple for the S&P 500 (using a blended P/E based on an average of the past 12 months’ earnings and the forecast future 12 months’ earnings) isn’t all that much higher than where it was at the start of each of the last three economic recoveries in 1992-93, 2002, and late 2009 into early 2010. “Despite P/E ratios being very high in each of those occurrences, they turned out to be excellent buying opportunities,” he says, likening the current market to a cyclical stock for which, during recessions, earnings crumble and valuations appear too rich. Few have made money waiting to buy a cyclical stock at a low P/E, he adds.

jog on
duc


 
Duc - I think it worth noting the distinction between tech and stay-at-home tech. There's some huge differences between the two. It's the stay-at-home stuff that's really red hot, the rest of it is pretty meh.
 
Ugh. Noting. Worth *noting*.
 
over9k said:
Duc - at what point would you go "ok, time to pay attention to the virus data, not the traditional indicators"?
Click to expand...
From my perspective, the virus data is not considered as big a threat as at the start of the pandemic. There are a number of reasons for this and this also leads to some of the complacency seen is different parts of the world.
  • The impact of covid 19 is better understood
  • There are many companies working on a possible vaccine
  • Even without a vaccine, many drugs have been tested on patients with covid19 with some success with reduction in fatalities
  • I remember at the start, one of the biggest issues was hospitals being overwhelmed, but hospitals have been built in a few weeks, manufacturers started making ventilators, finding health staff in retirement etc.
  • We are all adjusting to doing things different, washing hands, social distancing, avoiding large crowds, wearing masks and gloves etc. Even the demonstrations recently in Australia, while not a smart thing to attend, do not seem to have had any real impact.
  • While some countries are struggling with the virus cases increase, the death rate compared to case numbers seems to be getting lower for what ever reason.
  • The world has seen countries like Italy go through extreme challenges and then get on top of things. The deaths in these countries has been tragic, but life is starting to return to normal.
  • We will see spikes and possible second waves but we are in a better position to manage these than a few months ago.
  • Fundamentally, investors are seeing through the end of the pandemic and a new world which will be a bit different than what it was, but things will return to some sort of normal, even with a few spikes and second waves in some regions.
Iggy
 
Stay-at-home tech being the overwhelming contributor to the overall market improvement(s) we're now seeing:



With the megatech having such a weighting in the index, it's little wonder we see an overall bump. Take the stay-at-home tech out of things and it's a very different picture. Just on open there's a 1% bump in the sp500 but the equal weight index is just 0.16%. 6x the difference. Remove tech, and it's actually a slump.

Like I said/did, put your money into say-at-home tech - remember, the rest of tech's gone nowhere (e.g intel & AMD). Hell, if you want to put things on total autopilot, dump it into a tech index fund.

Virtually ALL the gains are coming from stay at home tech.
 

I thought about our discussion the other day with global investment and trade:

We need the Australian FIRB to provide exemptions for UK private investors, with the exception of a proxy.
 
Wanna remake that post in the other thread and we'll chat there? Don't want to derail this one
 
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