The theme was begun yesterday as we looked at the banks and long-term yields, questioning whether or not long-term yields have already pulled back enough to spur a bounce. As of today that still looks very possible. As noted in the trade log, I added TBT as a way to play that possibility.
Today’s update noted the Energy sector breaking upward. The charts are the charts and they are breaking bullish again, for a solid and maybe quite tradable bounce, at least.
This has the appearance to me of the quants’ machines programmed to sell the fading inflation story that has carried us to this point (through yesterday’s moderated CPI) and buy a resumed inflation story. Is it just machines being machines or something more? Undetermined as yet.
So whereas the broad relief bounce has been led by Tech/Growth with yields pulling back, if it continues on and if yields rise I’d expect that leadership to rotate to the reflation/inflation stuff for a bit. To sort of flip the bird at the Fed in the relief time window we’ve projected for August.
But this bird flipping could itself be the bringer of the demise of the relief rally as the hawking Fed lay in wait.
As for gold stocks, this is not a positive macro fundamental signal. I added DUST to hedge positions but I realize that the sector is pressured by several high profile miners getting clobbered on earnings today. Most of my stuff is okay because I was careful to select stocks that have either already reported or for which earnings is not a big event (e.g. developers, explorers). But it’s the very fact that the sector is taking this pressure from several miners as opposed to a widespread sector issue that I am going to be careful about holding DUST.
In other words, if the gross outs from these miners today are not tanking the sector that’s a sign of underlying strength. Also, even if the the fundamentals erode the inflationists can drive the miners up with the inflation stuff as well. Especially since they sold it down with the inflation stuff. Confusing, I know. But it is what it is.
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That is original tactical analysis.
I just wish the tactics did not have to happen within such compressed time frames. This market, I swear. Got to be nimble. Yesterday it’s a hint and today the hint is like a hammer over the head.
You are way too nimble for me Gary. Good thing there’s no trading fees!
Believe me, I would not be nearly so nimble if there were. Otherwise, I have to go by what I see even if on compact time frames. I look forward to this mess smoothing out after summer. Feels like it’s machines gone wild during summer trading.
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