Year End Rally Incoming?
Some Charts And Data To Watch
If you’ve been following my weekly outlook letters for the short time they’ve been hitting your inbox, you’ve probably noticed our thesis of US Dollar down, VIX down, stocks up has played out very well across the shorter term timeframes this month with MTD performance as follows.
Dow Industrials +14%
Small Caps +11%
S&P 500 +9%
QQQ’s +5%
With big tech reporting largely lacklustre earnings, we’ve seen a perfectly natural underperformance to the broader market with weakening relative performance.
QQQ vs SPY Chart
As the chart shows, the relative performance has been on the decline for a couple of months.
That’s information I like to pay attention to because it helps identify where the alpha is. Something our clients and members expect of me and it’s why my work has been focussed entirely away from Tech (aside from a risk:reward proposition on GOOG that I like) and the potential mean reversal I’ve highlighted in the semiconductors. (chart below)
SMH Chart
IWM vs SPY Chart
The small caps are a terrific gauge of market risk appetite and as the chart shows, it could potentially break out relative to the S&P500 so this is a chart I’ll be watching closely next week.
Our letters in the past month have already covered major potential trend reversals in Currencies - Letter Here and Bonds - Letter Here so I don’t see the point in covering old ground. Feel free to check those out. They’ve started to play out well.
With October almost in the books, and a pivotal (no pun intended) week ahead with the FOMC meeting scheduled for Wednesday, we now have to navigate some Fed shenanigans.
I’m not sophisticated enough to provide meaningful insight into Fed policy because I don’t have an ability to read minds, so my default position is to simply analyse the charts that matter.
We could rip higher, we could collapse. I’m open (and prepared) for everything.
I’ve taken the time this week to build out a deep dive video into the market with charts like the above, highlighting the areas / levels that matter via our incredibly small (but popular with our hardcore regulars) YouTube Channel and also highlighted some of the individual charts we’ve put to our clients / members over the last few weeks.