Get A Haircut! (FXI,QQQ,DIA,USO,IYT)

Get A Haircut! (FXI,QQQ,DIA,USO,IYT)   Earlier this week, freewheeling Hugh L. O’Haynew over at our Wall Street Elite desk decided to push the toothless FAANG narrative.  He was keen on portraying them as no match for the traditionally more defensive sectors going forward.   Well, no sooner had the words spilled out of his Visconti fountain pen, than old Huey was once again proven King Solomon, wisest of all men. Our fellow Modern Bully got his timing wham-doggy perfect.  The market did a flip like a four egg omelet down at the Canary Restaurant on Cherry Street, splashing the butter and bacon fat this way and that, and scorching old Netflix by a greasy 6.5% on the day. There were signs over the weekend, of course (for those without crust on their eyelids – thick crusts like you find on the toast down at the Canary), that a selloff was in the making.  But Huey already laid it out here.   What remains for us to determine is whether the selling will continue or was just a one-off, bad hair day for the big tech NASDAQ honchos.   And the answer is…   A look at the chart of the…

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Oil vs Wheels (IYT,USO)

Oil vs Wheels (IYT,USO)   It’s the interplay between the following two factors that we’re keeping our eye on these days, the better to apprehend the market’s immediate trajectory: oil and ‘market leaders’.   We’ve discussed this combo before, and how they work together.   The ‘leaders’ are the current sexy tech group, not related to oil directly, being themselves more a gauge of investor sentiment toward equity investing in general.  The transport stocks, too, are leaders; as a group they indicate where equities are likely headed, because shipping arrangements have to be made well in advance when new orders arrive at the factory.   In fact, shipping details and contracts are normally finalized anywhere between one and six months prior to industrial orders actually being produced.  And that advance warning gives us some lead time into understanding market direction over the intermediate term.   That said, the whole ball game gets thrown a curve when oil prices are in flux.  As the sector that’s most reliant on energy inputs, transportation stocks can be thrown into a tizzy when crude futures are trending fast. When they’re stable, of course, the game is a whole lot easier to play.   So…

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Monster Chiller Horror Market! (QQQ,DIA,USO,IYT,GLD,SLV)

Monster Chiller Horror Market! (QQQ,DIA,USO,IYT,GLD,SLV)   There’s a point in every horror movie in which the terror and gore can get no worse.  And then, as if the gods had collectively reached into their cruel joke handbag, it manages to do just that.   It gets much worse.   The freight train has just leveled the town, the bodies are strewn everywhere, widows and orphans and crying babies, fires burning, carnage, mayhem, bubonic sores and pus galore … and whaddaya know, that neo-Viking motorcycle gang from Peoria arrives, thirsting for a good mead-induced blood-letting and plump, diabetic children to sacrifice to Odin. It’s precisely at that point that the fright turns almost comic.  Sure, there are those who get up and leave because they can’t handle what they know is going to be barbarism for the most barbaric.  But for others, it’s hard to contain; the giggle is on, and it’s gathering strength, because the whole affair has been transformed into some sort of ‘surreal state of cognition’ – a dreamlike situation where you’re watching the horror, still somewhat involved, but you know it’s a dream.   Welcome to the Stock Market!   The current market set-up bears a striking…

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Equity Happy; Treasury Crappy (TLT,DIA,FCX,UUP,IYT)

Equity Happy; Treasury Crappy (TLT,DIA,FCX,UUP,IYT) We’ve been talking in more emphatic terms about the bond market lately, though not because we have anything new to say on the matter. The message has been consistent for several years – that a grand selloff in Treasuries would funnel tremendous flows of cash into the equity market, precisely at the moment that U.S. stocks were perceived as the greatest possible investment holding of the last three centuries. In other words, there’s a bullish equity bubble in the making that will eventually tear the buttocks from Ginger May Gorilla, while sending the bond market lower for potentially many years to come. So CRASS! Our latest rantings, however, come at a time when the yield on the three year Treasury has come up even-steven with the yield on the S&P 500 (see below), an inflection point that could have a significant impact on the direction of both asset classes. Here’s the way it looks graphically – The last time the two met, the vectors were reversed, with a breakdown in Treasury yields creating an advantage for equities (red rectangle). That took place, of course, while the stock market was melting down, and nary a lad…

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Wrap It Up and Ship Her Away! (IYT,AAPL,DIA,XLP,DBC)

Wrap It Up and Ship Her Away! (IYT,AAPL,DIA,XLP,DBC) We’re going to open today with an indicator that gets far too much attention, but that still has much to offer if taken in proper perspective. It’s the VIX Index, the Chicago Board’s measure of implied volatility in S&P 500 options, sometimes called the market’s ‘fear gauge’. Those with a simplistic view of the VIX claim that when it’s low – watch out! – the market is about to take a spill. These folk see the complacency behind low volatility in options as an inevitable contrarian sign that the market is about to explode. And there’s truth to the notion that low volatility is eventually replaced by high volatility. The opposite is also true. Periods of high volatility lead directly to periods of low volatility. On a long term chart, it looks like this – But it’s also clear from the chart that volatility can remain excessively low for extended periods of time, rendering the “VIX at historic lows!” crowd all but irrelevant. A New Take We were been pioneers in the formulation and application of a related indicator that we termed ‘volatility compression’. It’s a marker that has served us well…

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Out With the Old War, In With the New-USO,IYT

If it looked like happy days were here again after the Korean Peninsula appeared to be cooling, just take a look at the South China Sea and the Middle East.   In the former, tensions between Mainland China and Taiwan are flaring again, with the communists declaring in both word and deed that it’s only a matter of time before ‘reunification’ takes place.  War games and exercises on both sides dominated the news this week and last, as everyone positions himself for a show of strength and urges his opponent to take him seriously.   From there, hop over to the other side of the Eurasian land mass, where Israel has announced what many already knew to be the case – that Iran is doggedly working on its nuclear arms program in locations hidden from IAEA inspectors.  The Israelis claim to have a trove of evidence to prove the case, and it appears the major western powers are about to send inspectors into Iran with the Israeli documents to check if, indeed, a violation of the Vienna Accords took place.   If that’s the case, you can almost assuredly expect the U.S. to drop their support of the deal, recommit…

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We’re All Numismatists Now (GLD,XPO,IYT)

We’re All Numismatists Now (GLD,XPO,IYT)   We’re going to lean against the wind a little this week and offer up something that gets little attention in the investment world, though, in our view, it deserves more.   There are many folks who, like us, like the market’s prospects in the near term.  There’s also a full throated minority that carry the bear case.  But both groups are in full agreement that bear markets begin where bulls end, and even saying so is too much a truism to garner any meaningful attention from either party.   But what if that were not the case?  What if markets did not turn over in the normal fashion after the last highs were hit?  What if, indeed, no bear market whatsoever ensued?  What if everything just stopped, and all the money that was formerly invested those markets just went ‘poof’?   Sound crazy?   We’re talking about a cataclysmic event, to be sure, one that would take down the system entirely, either temporarily or for good.  And we’re talking about it precisely because 1) no one else is, 2) there’s a remote chance it could happen, and 3) we want to be prepared for…

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“Bobbi-Jean, You Take That Mask Off Now!” (IYT,XPO,DIA)

“Bobbi-Jean, You Take That Mask Off Now!” (IYT,XPO,DIA)   It always struck us as interesting that this whole FBI/Dept. of Justice/Russian meddling story began with something the G-men call ‘unmasking’, a process whereby American citizens’ identities and affairs are exposed during a broad intelligence sweep that targets foreign nationals.   Normally these people and their privacy would be protected.  Unless, of course, permission is granted from a higher authority to reveal their names.   Unmasking. There are also periods during which all the masks come off.  And if we’re fortunate, this could be one of them.  Call it the midnight hour, the post-ball tolling of the bell, the point at which the pumpkin truth is reinstated and all the poor and unadulterated dirty laundry is revealed for what it is.   Wouldn’t that be nice?   Too Many Secrets   We’ve a hunch that pretty much all of Washington’s official secrecy exists only for the benefit of those who actually stamp ‘secret’ on the files.  But it doesn’t have to be.  In fact, we’d all greatly benefit from a dose of daylight in our public affairs.   That said, the markets, too, would benefit from a good whack of truth,…

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That’s Some Horse! (DIA,AAPL,UUP,IYT)

That’s Some Horse! (DIA,AAPL,UUP,IYT)   There are stats and there are stats.  And, of course, when the market is in the middle of a panic breakdown, all the facts fit to print are lugged out of the analyst valise in order to convince you of what’s to come. And here at Normandy, we’re really no different.  Regardless of how little we trust the mainstream, fundamental approach to investing in this era of absolute government intervention, we have to rely on something.  Coin-flipping went out at least a century ago in the stock buying game.   As we’ve stated repeatedly, the contest is now being played on the sentiment front – in large part – while flows of funds, sector rotation and some basic technical analysis still offer clues to market direction.   The larger picture will continue to be dominated by the size and degree of intervention by the Fed and Treasury, and while we’re always watching those two do-gooders like a chickenhawk, much of what they do is simply not transparent and the rest grinds its way through the system very slowly.   So it’s to the stats we’re forced to return for our commentary.   And we start…

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DON’T LOOK BACK! (UUP,IYT)

DON’T LOOK BACK! (UUP,IYT)   We’re currently in the midst of an overbought rapture of retail investor effusion, one that will send markets unpredictably higher in the very near term before an inevitable stall brings it all to a halt.   At that point we’ll have to see what happens.   It could take a few days, a few weeks, or a bit longer, but there’s little chance it won’t occur.  The trajectory has been set, the momentum is building and the masses are enthralled. What’s less predictable is how the rest of the investment world will respond.  In particular, we’ll be looking to the bond market and select commodities for our cues, but equally important will be the emerging markets and local high yield securities, all of which offer a meaningful gauge of where the next big moves are going to take place AND what volume of selling we can expect from equities.   As we’ve remarked repeatedly in this space over the last couple of years, we do not believe the final market top is at hand.  There’s still a measure of hubris that has to be attained before the ultimate heights are reached, and the current mood…

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