Wednesday, February 17, 2021

Morning Note: What a Good Setup Looks Like

Just a quick note this morning; our main weekly message coming your way later today...

So, way stronger than expected retail sales reported for January, and, well, stocks are taking a hit this morning... Yep, stocks are trading these days on the prospects for stimulus, and good news of course doesn't stimulate the need for stimulus... I've seen this before, by the way...

Here's from a Bloomberg article this morning:

"U.S. stocks dropped after strong retail sales and produce-price data fueled optimism in the economy..."

I kind you not! 

Although the rest of that sentence read:

...and stoked inflation worries."

Damn! Can't have your cake and eat it too, I suppose...


Only 3 of the Asian markets we track closed in the green overnight.

Europe's struggling this morning as well, with 15 of the 19 bourses we follow presently in the red.

U.S. major averages are lower too (although by a lot less than they were a minute ago when I typed the intro): Dow down 29 points (0.09%), SP500 down 0.27%, SP500 Equal Weight down 0.24%, Nasdaq down 0.59%, Russell 2000 down 0.71%.

The VIX (SP500 implied volatility) is up 5.78%. VXN (Nasdaq i.v.) is up 4.42%.

Oil futures are down 0.28%, gold's down 0.66%, silver's down 0.42%, copper futures are down 0.58% and the ag complex is down 0.30%.

The 10-year treasury is up (yield down) and the dollar is up big this morning, 0.53%.

Led by Verizon (Buffett bought some), energy, healthcare, banks and emerging market equities, but dragged by miners, Eurozone equities, tech and gold, our core portfolio is off slightly, -0.09%, to start the day.


Howard Marks, in his must-read-for-any-serious-investor Mastering the Market Cycle, explains what a good equity market setup looks like... You tell me if this entirely describes today's environment, particularly in terms of sentiment and price levels:

"...opportunities for investment gains improve when: the economy and company profits are more likely to swing upward than down, investor psychology is sober rather than buoyant, investors are conscious of risk or—even better—overly concerned about risk, and market prices haven’t moved too high."

The permabulls will glom onto the former, the permabears the latter, the objective market actor will weigh the risks and probabilities -- at all times and under all conditions... 

Have a great day!
Marty





 


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