Every day I go through roughly 200 stocks/indices/indicators, several times per day, looking for signals, attempting to connect dots and ultimately, hoping to find risk/reward situations that create outperformance.
The title Lies, Damn Lies seems appropriate as when the markets want to reveal any kind of truth, they first do so through blatant lies. Conversely, whenever truth appears apparent, there is likely to be deception involved.
These are simply thoughts (some completely random) as I attempt to connect the dots:
- AAPL looks like a trash can on legs. The lag it has experienced has now become so pronounced that it requires a dose of fundamental steroids in order to move substantially forward. Of course, that dose could come via earnings. However, somehow it doesn't seem like a highly probable conclusion to the current chapter of the AAPL saga for it to overcome a downturn in the iphone cycle in a few weeks. I actually wouldn't mind buying into it, but it would have to be substantially lower.
- Volume across the board is somewhat concerning here. The participation at this stage of the rally is negligible. Either the market needs a substantial fundamental event to get buyers interested again or the market will roll.
- Semis were all the rage today after XLNX and LRCX reported. Of course, INTC came in after the close today, adding a little zig to today's zag. This isn't 2017. What that means is that chasing positive fundamental developments simply because they make you feel good is a trap.
- Bringing me to my next bullet point: This is a market where investors want to buy discomfort and sell comfort. This will be an ongoing theme in 2019, just as the theme I was pounding the table on last year was that everything changed in 2018. In late December/early January it was extremely uncomfortable to buy stocks. In late January it has become exponentially more comfortable to buy stocks as we have found that earnings were nowhere near as nasty and vile as advertised by a market that fell into the abyss. The comfort levels here for investors are begging to be taken advantage of. The market will not waste time in doing so in the weeks ahead, once again instilling doubt in the minds of the ravenous masses.
- Financials are especially guilt of providing the aura of absolute warmth and comfort with last week's onslaught of positive reports. It has provided those who liquidated during December in a recency bias induced coma of reliving 2008 with the emotional wherewithal to jump back in. After all, the water is once again warm. The mirage of comfort in financials is begging for the markets to take advantage of those who need the equivalent of emotional support animals to buy in the form of positive earnings reports.
- The level of intelligence involved in speculative endeavors at this juncture is best demonstrated by the fact that Intel call options experienced call buying in the 99th percentile of annual data going into earnings today. Investors are very obviously believing this market is playing checkers instead of chess. The days of easy earnings plays layered upon a chain of positive fundamental developments are over. The dynamics of the game have changed. Those speculators who were buying calls on Intel today also believe that the entire market is headed much higher. In order for the market to move higher, it will have to shake off the fleas first.
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