Partial Look at the Models and Positions
Friday I was part of the Festival of Learning sponsored by Real Vision to help new and experienced traders.
The topics that came up were inline with what everyone who trades wants more insights on:
FOMO
Position Sizing
Risk Management
Entries Stops and Exits
Portfolio Management
Managing Emotions
One question was on AI and Robo Trading-something we know a lot about.
First off, having decades of discretionary trading experience, evolving into algos was a process.
All of our rule-based, structured disciplined approaches as discretionary traders, are an integral part of the quant models and blends.
Our goal is to create an “edge” using equity trends from various markets and asset classes.
The reason I bring this up today, is because many of the positions are inline with our personal view of the macro.
And many of the positions are following our trend-strength indicators that have placed us in sectors we could have potentially overlooked on our own.
What fascinates me right now, is the injection of liquidity by the Fed, which of course is not being called by its rightful name-Quantitative Easing.
That leads me to think-what else can we buy now, that hasn’t been crowded by the FOMO crowd?
As you can see in the Bloomberg chart, cause/effect for tech, but also for many different sectors begging for the Fed fix.
The Economic Modern Family though, has many other issues.
As the 1st quarter ended, only Semiconductors closed above the 2-year or 23-month business cycle to show expansion.
The rest of the Family did not, and Retail and Regional Banks still way underperform.
Which could mean more QE on the way and the rest of the indices and key sectors follow SMH, or it could mean a wakeup call for the 2nd quarter.
Either way, we still believe that most are #lookingforinflationinallthewrongplaces.
Sure, the market loves the liquidity in the name of saving any future bank issues.
Everything though the Fed does as we well know, has a cost.
Last week, I wrote about agricultural commodities and DBA the Ag ETF.
Since that Daily, DBA has risen over 4%.
So, what should we look for next?
I wrote about long bonds (TLT).
TLTs rallied with the market. The good news is that long bonds are underperforming SPY, which is risk on.
If yields fall further however, will that be good for the market when all of a sudden, the Fed has to become more aggressive again to control rising inflation?
Haven’t we learned yet that the more “QE”, the more spending, the more inflation and so on?
So, watch the bonds. Consider the grains.
And since the PCE released Friday excludes food and energy, keep track of precious metals, sugar and crude oil.
Our quants have not gotten into oil yet-so from a macro perspective, over $82 we are interested.
Look for momentum to clear the 50-DMA along with price. Then, the risk will be minimal, and the reward substantially great.
But also, the cost to the economy.
Stock Market ETFs Trading Analysis & Summary:
S&P 500 (SPY) 405-410 back in focus
Russell 2000 (IWM) 170 support- 180 resistance still
Dow (DIA) Needs a second close over 332
Nasdaq (QQQ) 329 the 23-month moving average-huge
Regional banks (KRE) Weekly price action more inside the range of the last 2 weeks-still looks weak
Semiconductors (SMH) And she’s off-255 key support 270 resistance
Transportation (IYT) Cleared the weekly moving average so now has to hold 225.
Biotechnology (IBB) Good performance but not enough yet unless clears 130 area
Retail (XRT) Ran right to big resistance at 64
Twitter: @marketminute
The author may have a position in mentioned securities at the time of publication. Any opinions expressed herein are solely those of the author and do not represent the views or opinions of any other person or entity.
