Mr. Market's 18th Inning

(Oct 28, 2018 Weekly Update)

This week included conclusions in long running dramas in both the counting houses of our age and on a baseball diamond. Pick your time frame or your stats - whether it was 8 years or 8 hours (give or take), price action slicing through various 200 day SMAs or Brooklyn expats closing 3-2 over Boston*, or the litany of errors that end up in the “despite” column (e.g. what could have he been smoking, literally, to tweet those magic numbers, how could there be stranded runners on both sides in multiple innings, and a whole lot more), some long-running streaks (like this sentence) have an end. (*post-script: It would be Los Angeles losing, Boston breaking out to victory with 5-1.)

This weekend also included a wonderful, educational and fun gathering at StockTwits’ west-coast original “Stocktoberfest” gathering. I remain grateful for the privilege of meeting and befriending remarkable smart, hard-working and funny folks and for the joy of reconnecting, “IRL”, with long-time friends. What’s great was the friends, both “old” and new, were people I would be happy to spend time with whether or not it was about the markets, money or macro - now that’s great.

This year’s gathering, had as usual entertaining talks, from a market-wonk P.O.V., including from Phil Pearlman (Thousands of years of Banking Behavior meets cute with “Bobby the Brain” -and I will never be the same again), Todd Harrison (his coverage of the investment landscape from Cannabis-related medical research which hints at a multi-decade-scale opportunity), J.C. Parets (whose amazing and bracing set of charts, which overlapped with my trend-trading approach, hopefully some BTFD-folks will consider), Tinder product chief Brian Norgard (whose thoughts about tokens, decentralization and future models of work and compensation, were personally exciting as they overlapped with thoughts I have explored on my sibling site “The Big Stack”) and much more.

I also caught a nasty cold. But it was so great to hang on the “Deck” of the “Del”, learning and laughing a whole lot the whole time. I am lucky.

Let’s go to this weekend’s Rooster360 update. The past few weeks have been entitled “Measure”, “Moody”, and “Mad”. This week I suggest to friends could be “Mashed” or “Messed Up”. But it’s not a permanent state of being, just as unbelievable momentum was not a permanent state of things either. Ed Seykota I think mentioned that Mr. Market has to both breathe in and breathe out. Mr. Market has been “waiting to exhale’ as it were, after taking a whole long deep breath in.

On to the charts, lots of them. Take a breath, hold, release slowly. Repeat.

Let’s begin with who struck-out, the STOPPED OUT ideas. Like last week, there are quite a few, in fact I had to create three chart images of the notes, shared below. Some big names have left the field, and less than a handful of them were “SELL” / avoid ideas. Please comb through the lists, and then the STOPPED OUT chartfest. It’s a lot to absorb, I admit, but from my trend-following point of view, it looks like time in the dugout. Shorter-term traders, however, may be eager to prep for a potential post-over-sold bounce (not my wheel-house but I think some readers are about to go make hay pretty soon).

$EPAY $FTNT $FIVE $AAPL $MSFT $SEAS $SNE $CF $PF $WTI were the top 10 STOPPED-out plays which made from 112% down to 15%. What a line-up of retirees.

Here’s a link the rest of the STOPPED-OUT CHARTS. The list is simply too long.

Here are, however, are the bottom 10 charts from the STOPPED-OUT charts. Former high-flyer $ALGN was completely wiped out. Let this be a reminder of what can happen even to a “can’t win”, seemingly “unbeatable” team in markets and elsewhere.

Let’s press on to the next list, the LAGGARDS as of this week. They haven’t been stopped out but they are under-performing and negative. The lists are filtered up to Q2 2018. The results are similar for Q3 2018 and what there is of Q4 2018 but those ideas are excluded for a variety of reasons - primarily that they are bit too “young” to track. Just the “top 5” LAGGARDS charts are shared this time: $XOP $SHO $KEYS $PTR $CTXS. With any luck, the story might be different in 2019.

Let’s move on to the Top 20 Leaderboard, for both SELLS and LONGS. We’ll begin as is the house-style, with SELL lists. Here is both a portrait of the falling-knife and potential in the basement bargain in the making. Not that I would fight them, not me.

Let’s move on the TOP 20 LONGS Leaderboard. What a sea-change. I have written that for most of the time, these lists will typically be almost the same from week to week, but that they tend to reflect the shift in market leadership, and that an avid observer will notice the shifts in leadership and sentiment early enough to follow along.

The Top 10 LONGS as of this week includes:


And now let’s move on to ideas which may yet prove themselves from recent weeks.

Let’s move on to the SELL ideas list, the flip-side list of ideas which have the potential to ruin somebody’s day or make it, depending on their system, investment or trading edge and just plain luck.

Let’s move on to closing thoughts.

I’m a trend follower. I have already hinted at what was unfolding and it has most decidedly been confirmed. I don’t know how long it will persist and what the washing out will require. Many of us have seen massive long trends wash themselves with either declines and/or winding trading ranges over protracted time-periods.

Here’s a list of the Top 20 from before Summer 2018 really kicked off, June 2018: $NFLX $ETSY $SRPT $TDOC $FMI $ARWR $ADBE $GRUB $USAT $BZUN

It’s been four months and full season. The leaves have turned. Long time leaders have been eclipsed and replaced, some to never return and some on a long retreat and rest. and now for some long time-frame charts. In between there are going to be some great rallies in-between. If there was ever a good time for a bounce, whatever the animate state of the cats involved, get ready. Otherwise, stick to your investment plans and “enjoy” some bargain price events.

But NOT all is lost. RedHat has apparently been bought out by IBM as of this writing, with a massive premium over this past week’s closing price. Just another chapter, another inning for a long running game for IBM, including mechanical calculating machines, “Holleriths”, through on to room-sized “big iron” mainframes, PCs and software and SaaS. The game plays on.