The Week Ahead, Game Plan and More.

This weekend, I saw Michael Burry post a chart comparing the current decline to the one in 2000. I thought the analog was pretty interesting nonetheless. You can check it out here.

The whole idea of a prolonged downward spiral into the abyss could really be possible. The S&P for example declined around 50% back in 2001 from the all time highs from the tech bubble.

The world is fundamentally different from 20 years ago though. Anyone who looks at the market reaction from Covid and doesn't draw the same conclusion needs to reassess. It is actually different this time, with regard to being able to allocate resources and the fundamental nature of adaptive consumers and workers in the western world. Was Covid a micro depression or a crash-within-a-bull-market? Is what we are seeing now with regard to a slowdown just the simple makings of the 7-8th inning of a bull market cycle? Perhaps some of the charts can help answer the question.

Small caps are still holding long term trends. This is a very clean chart.

Bonds reversing could be a sign of a much healthier market environment that will stop discounting forward growth so much.

Bitcoin is holding the 2018 highs

"Ok, but I want to make money tomorrow and now". Look, I get 1,000 questions about short-term charts. The information I try to provide is a framework for making better decisions. Lets think through possible scenarios where if these long term support zones coupled with bonds holding is meaningful for a gameplay. Here is a short-term SPY chart. From a conventional TA perspective, you would be buying the trend line breakout around 385 on dips.

This is however slightly dependent on the bonds holding above the 140 area.

Why? Because the entire market is basically owned by interest rates right now. This has been our theme for months. Bonds are pretty weak this morning, so I would not expect a big reversal like last Thursday when the market was down and bonds were up. Wait for the bond market to stabilize and then it could be a nice Tuesday style reversal.

Not a lot of people are talking about this big reversal in natural gas. The way we move last week is not really too bearish for a commodity really designed to go to 0. This is a different piece of the puzzle would could be priced into rates pretty soon, and energy as a whole. Be on the lookout for energy strength because that would NOT be bullish for bonds.

If this is not bullish for bonds, it is not good for the general conditions of the market. Some commodity names are looking interesting. Check out this coil above a breakout spot on CCJ

I also see solar very interesting here

In short, if the energy market starts to ramp up I want to be long these alternatives because I think you have more of a chance of being right in the long term and they should do well if general risk-on conditions improve as well. These are "hard to lose" setups to me.

What do you see? Feel free to email me.