Mr. Market's Notes Of A Mess

(Week ended Oct. 19, 2018)

Mr. Market is in a mess - time to survey the damage. Over the last few weeks, I have characterized the price action with a short-hand of puns: “measured”, “moody” and “mad”. This was deliberate, and as we see, a concise description of market conditions.

Last week’s change of format will become the standard reporting format, with summary reports and charts. This is again an omnibus report, in four sections. A word of advice to readers, review this when you have time, get a cup of coffee, tea or whatever keeps you going, use a tablet, or something with a large screen - if you do this on your smartphone, that’s fine but be patient. This is a long report willed with lists and charts for your review. (Really, take your time, I took mine to make this specific update for your review. Given the past few weeks in the markets, I thought it important to create a deep and detailed weekly update in one post. I wrote last week that readers should embrace new trends in Q1 2019 but this final quarter will be challenging.)

Take your time, grab a pencil and please review in this sequence. There’s a lot of information here and hopefully I have kept it as concise as possible. Let the numbers and pictures shared with you do most of the work and talking.

1-STOPPED IDEAS (Ideas which have been stopped out)

2-LAGGARDS (Ideas not yet stopped out)

3-TOP 20 (The current Top 20 LONGS and SELLS)

4-“NEW” IDEAS (Newer ideas which may continue to perform) and CLOSING remarks and notes

STOPPED IDEAS (SELLING and then LONG ideas):

Charts for STOPPED OUT SELLS include the following:

the STOPPED LONGS ideas, presented first in list format:

Charts for the STOPPED LONGS include the following charts: As we see LULU got “pants” (pun intended). I was surprised by Mastercard’s (MA) exit but that can happen. TNDM’s ascent, in less than 6 months, was hot and so its exit was equally hot as well for about a 180+% notional simple gain from May 2018.

And now for the LAGGARD reports, both “short” and “long”.

The most recent closing price has triggered the most recent suggested exit price and may either survive and become winning trends or hit their stops and join the ranks of STOPPED OUT ideas. They may become candidates for exit before the end of the year and become candidates for 2019 trades in the opposite direction.

And now for some charts of LAGGARD “SELLS”, just a few of them. As you see, the list is long. These may in fact become contenders for LONG ideas in 2019.

And now for the LAGGARD LONGS. Given the current environment, this may in fact serve as an “early warning” list of potential new stopped out LONG ideas.

And now for the relevant LAGGARD Long charts. Not yet down & out, on the ropes.

And now for the TOP 20 SELLS and TOP 20 LONGS.

As I have suggested in recent posts, this leaderboard will look very different by Q4 2018. Here we are, well into the final quarter and the market has changed quite a bit. We begin with the TOP 20 SELLS and then the TOP 20 LONGS. Charts of interest accompany this report. First the SELLS list is shared and then related charts.

And here is the current TOP 20 LONG list. It has some familiar names but what a change from Q1 2018. Presented below is the list and then related charts.

Charts for the Top 20 LONGS

And we close, with potential ideas and notes for your review and files. As always, we try to begin with “SELLs” and then go to the “LONGs”. These ideas are culled from Q3 2018 entrants, which have resulted in a positive notional gain since the week of their addition to Rooster360’s master ideas universe. There are no guarantee, just possibility.

Some NEW ideas SELLs charts for your review.

and now for the LONGS ideas pulled from the Q3 2018 quarter. They may keep running, or they may hit their stops. I wouldn’t say dive in but review them and the current weekly charts and adjust your lists accordingly. In light of the past month, these ideas may very well join the ranks of future STOPPED OUT updates.

This updates is long for those you spoiled by life on the Internet but these notes are summarized, believe it or not, from a much larger data set of an average of 1000+ ideas tracked and updated weekly. This kind of thing can then be used to track Mr. Market’s moods and provide active trading ideas. And this kind of things usually costs plenty of money, when submitted with a few pithy words and “actionable items”. I do these updates as one part ritual and one part homage to a now gone mentor, and hope that they push you to focus more on preparation and process and less on “action”.

Final remarks. In summary, sentiment is not at the top of mind but price action is. I chose “measure”, “moody” and “mad” in the previous 3 weeks deliberately to sum up market conditions. I use the equally corny word “mess” to describe the market before us. That said, I am optimistic that together we will gather new trends to benefit from in this quarter and in Q1/Q2 2019. It’s the same as it ever was, there will be leaders and we will adjust our plans to suit what Mr. Market is trying to tell us.

Right now, I have watch lists of potential longer-term investments increasingly at the ready. In terms of active trend-trading, cash is less a choice and more a consequence of following what prices are doing. Let’s look at what prices are doing in terms of the “big picture” in futures. We’ll just review Euro Stoxx 50, Gold, Euro and the Russell index.

It’s funny to look at gold after a long period of neglect. I read about how a recent precious metals conference was filled with more empty tables than attendees. The contrarian in me felt a twinge of nostalgia for when it was a 3-handle trade that nobody gave a damn about. I’m not saying become gold-bugs (please don’t send me stuff about inflation, death of fiat, etc. I’ve read it all) but it’s something to take note of.

Back to more “top-down” charts, which help me think about credit, including: lumber and first-world sovereign bond futures. Top of the heap ma!

It’s not yet time to exit risk but it is an anxious time: I like to use Brent & S&P 500.

No need to look at China and emerging markets. Everyone knows how those charts look. That said, there are some value nuggets in there and I will be looking privately.

These notes may be updated for more charts and thoughts on tactical plans. For now there is a lot of material for all of us to digest in this massive update. Good Luck.