Q1 SPX update and Review on calls - April 14, 2015

Two weeks in Q2


Lets review from previous post on performance:

Feb 4th 2015 Post

Jan 23 2015 Post


Formalized from jan 23rd expecting big correction, qualified in feb 10% correciton in US equities needed.

Thesis still in play:

• Resistance in play
• Short term strong closes below 50 SMA
• Big test to see price stabilize below 200 SMA
• Series of Higher Lows
• Sentiment in line with interest rates and FED speak

Fundamentally weak support going into corporate earnings. Whats to drive prices higher in short to medium term? 

• Theoretically weak consumer. 
• Energy sector weak
• Financials so so
• Utilities? 2014 trend positive
• Healthcare?
• Tech?

Not enough positives to push higher. 

Is contigon from Europe a possibility? Psychologically and technically yes only imho. I see 10% drop only as a price correction in the larger bullish equity trend. We will need to see macro correlations consistently disappoint to see a sustained down trend to end of year. 

Get the feeling we see correction and year ends flat. 

*Side note: Greece needs to blow up and leave the eurozone. Too much at stake for whole system to tank. Cut the cancer and move on. Short term will be bloody and messy but we need this shock to the system to correct fundamentally. Will be interesting to see how Iceland moves forward as well given different trajectory and path post blow out. 

Clarity Conclusion:

• Still expect greater than 10% correction in 2nd quarter
• Once it occurs need to assess fundamentals and sentiment closer

Long long term is up, short term and medium bearish (long long = year to years out and short and medium equals one month to 6 months)

Need to see broader picture too relative to other financial markets and other global markets to gain more context.

Above is more or less a pure technical play with some brief fundamental/sentiment considerations based on headline skimming

Found in notebook written back in 2011:

Prices follow fundamentals. Yes, true. But prices will often lag significantly since information is not efficient. Perception is never 100% correct. ideas of dynamic mean reversion. Fundamentals are not some static variable that once analyzed stays (as is).

Policy or ones philosophy must incorporate this dynamic fact.

Inefficiency allows and gives rise to multiple solutions to similar problems

trends, value, "edge" are all ephemeral because of this.

Right and wrong do not exist; what is, exists

Feb 4, 2015

month one of 2015 passes correct formation still in play

Thesis still stands, pyramid gains here. 

Stop - to resistance or slightly above.

Fews ideas here to possibly confirm.

1. Oil led via fundamentals in its own market

2. Divergence means the prices will revert back to its mean? correlation or whatever? Think pairs trading.

3. volume supports correction, markets behind this. 

4. lots of short covering in WTI spot, however no major fundamental changes here

5. 10% correctin in stocks can mean prices still very soft in crude

6. USD follow correlation beautifully. conveniently timed to euro problems. Markets are linked?

Overall trend set still in play, hold to guns. Main play is stock correction which is lagging. 

Fundamentally don't "feel" real material fundamental strength here need see people take risk off for anything to continue.

Possible swans? Will think about that more later.

Repost from elsewhere - Jan 23, 2015 - lets get back into it

• uncharted territories
• no value in these earnings
• correction to real leg up needed to get full extension on trend (think waves)
• Still relatively cheap given highs and history
• Smart buys at 1400-1500

hedge on inverses

look for the values on drop

Short term trend looks very weak. First two quarters retrace? Buy in? How to play first and second quarter in terms of portfolio allocation?

The year 2014 is just the extension of the raging bull form 2013, but is there any valitity here? NO fundamentals going into the trend. Need to confirm with volume analysis and sentiment indicators. 

Gut feeling says BS on the year leg up. Smart money exiting waiting for crash given last quarter performance 2014. Lots of nice long covering from Oct 2014. 

Trend actually extends from 2012 bull market. Post sovereign debt = us economy driven sentiment. Pent up unused capital became less risk averse with no where to go. US seems good? ok why not... lots of werid stuff going on in currencies. Lots of mixed indicators dollar strength and commos makes sense but equities not following... slow convergence. 

Will like to see this baby crash be full fully going in.

Maybe good plays to start getting back in the game is to short the dollar. Will look into how to get this exposure later if thesis makes sense. 

BBRY - Update 2013

http://analyzecapital.blogspot.com/2013/09/bbry-sept-21-2013.html

Called it


blackberry-reportedly-in-talks-with-google-samsung-and-others-about-buyout

 

• Price rapidly approaching buy zone. Another 1.50+ off  and I think its fair game to buy
• Unlikely deals will sour unless management is that bad... given company performance perhaps it wouldn't' be surprising if they did
• I think other exits are unlikely and they will be forced to sell cheap
• Negative scrutiny from MSFT NOK deal
• Lots of short term pressures to see price go further down = better value in buy once deal goes through

GIS - OCT 1 2013

Old chart from last week - 3 year weekly chart

 

Lets look at the long term chart and top down fundamentals:

• Strong strong trend past 3 years
• Long term chart says correction needed
• Likely correction longer term out
• 60% of top line from US --> how is consumption in staples?
• How are commodities prices? Is there pressure? If pressure what spill over can we expect?
• Inflation indicates probably no price pressure, Fed confirms with policy (however there are divergences from individual commos markets to equities, must look more carefully)
• How is growth expansion abroad? Can GIS diversify revenue further?

It would be nice to see longer historical price trends. No thoughts no calls, no HW done.

Rambling Thoughts

I love the divergence of equities and commodities seen from 2012 and 2013. Break from historical correlation leaves rooms for many ways to make more money and a more interesting dynamic to look at. Time to start looking back at fx and commos again.