A look at both sides of the markets, sentiment, valuations and more
On the one hand, Jesse Livermore is famous for trading stocks. On the other hand, among other quotes from Jesse Livermore, are these two: “Money is made by sitting, not trading.” and “It takes time to make money.”
On the one hand, the S&P 500, Nasdaq and the DJIA are all at all-time highs. On the other hand, the small cap and biotech indices are having a hard time rallying and are about 10% from their highs they set back in August of last year.
On the one hand, we should be worried for chips and Apple and industrials and cyclical stocks as we head into earnings season. On the other hand, social media and US consumer companies will probably have good earnings reports and guidance.
On the one hand, I’m worried that the mostly complacent bullishness I hear on TV and from the trading public means that sentiment is too bullish. On the hand, I don’t see the small cap day traders high-fiving themselves, which is usually my favorite short-term top indicator.
On the one hand, it’s good to see rates have risen again and are not collapsing anymore, as government bonds in Europe and the US have all finally sold off a little bit. On the other hand, rates in Europe are still mostly negative yielding, indicating a broken system (people will only lend someone money at a $1 to get back 99 cents if they’re forced too, which means it has to be government systems that are forcing money into negative yielding bonds). And on the other other hand, we don’t want to see rates spike too high too fast which would cause some disruptions to the financial markets.
On the one hand, articles like this “A Koch Executive’s Harassment in China Adds to Fears Among Visitors,” are starting to appear which confirms my fears about a US/China travel/investment chill. On the other hand, we all agree that something had to be done to stop China’s government from usurping our technology and that is going to require some chill/fear/change.
On the one hand, valuations are quite high, as so many growth stocks trade at more than 10 or 20 times sales, many of which don’t have revenues or earnings. On the other hand, many of these companies have 70-90% plus gross margins and are about to start kicking off billions of dollars of cash in years ahead.
On the one hand, FAANNG (FB, AAPL, AMZN, NFLX, NVDA AND GOOG) is over owned and over analyzed and over loved. On the other hand, most portfolios certainly should have some of these names that have Revolutionized and continue to dominate our world.
That’s a lot of cross currents. Cross currents by themselves are neither bullish nor bearish. They simply give us an idea of which way the economy and society will flow depending upon the outcomes.
On the one hand, I am feeling a lot of pressure to get come up with some great new ideas for my Trading With Cody subscribers and for my hedge fund. On the other hand, I know that forcing trades is a terrible idea, so I just keep analyzing, searching for new ideas, waiting for the right pitches and doing more homework (think back to those Livermore quotes that I started this report with).
I’m going to stay focused, work hard, be patient and strive to be objective.
