SENTIMENT SUNDAY
Tail and top while the suits top and tail
THE BRIEF
This week was a week of dichotomies. On one hand, we had a tale of panic and market meltdown. On the other hand, we had improving economic data. If you cut through the noise and went with the latter account, you were on the right side of history, buying whatever Wall Street had sold to you at a discount the following week. Remember, in a rigged system, the only way to beat the Suits is at their own game.
Tail and Top While the Street Tops and Tails
Due to multiple breakthroughs by modern-day mathematicians and behavioral scientists, we know periods of market volatility tend to cluster. What does that mean for us? Well, seeing a big down week meant the next week was likely to be just as violent—whether up or down.
Luckily for us, we witnessed +1.80%, +1.67% rallies on the journey back to all-time highs. What mattered was having the conviction to buy the dip, and we did because we had our macro framework to fall back on while everyone was losing their marbles watching stonks tumble.
If data indicated an Armageddon style scenario—a sharp reversal in economic data, a black or white swan (or a Reddit user deepf*ckingvalue actually selling his GameStop shares)—I’d have gotten out, sounding the alarm.
But the latest data released last week (minus Spain) points to the opposite scenario: new all-time highs in stonk market, a weaker U.S. dollar, higher interest rates, commodities booming, Bitcoin soaring (I sold a bit on the rip), and—sadly—gold collapsing.
Here’s what we’re dealing with:
Global PMIs Mostly Above 50 = Growth
U.S. ISM Services PMI: 58.7 (+3.53%, +2%) — PREV: 56.7
U.S. ISM Manufacturing PMI: 58.7 (-3.29%, -2%) — PREV: 60.7
China (Caixin) Manufacturing PMI: 51.5 (-2.46%, -1.3) — PREV: 52.8
Spanish Manufacturing PMI: 49.3 (-3.33%, -1.7) — PREV: 51.0
Swiss Manufacturing PMI: 59.4 (+2.41%, +1.4) — PREV: 58.0
Italian Manufacturing PMI: 55.1 (+4.36%, +2.3) — PREV: 52.8
French Manufacturing PMI: 51.6 (+0.19%, +0.1) — PREV: 51.5
German Manufacturing PMI: 57.1 (+0.18%, +0.1)— PREV: 57.0
UK Manufacturing PMI: 54.1 (+2.27%, +1.2) — PREV: 52.9
Factory Orders Increasing
Factory Orders: +1.1% — PREV: +1.3%
Healthy Construction Spending
Census Bureau Construction Spending: 1.0% — PREV: +0.8%
TIPP Economic Optimism Above 50
TIPP Economic Optimism: 51.9 (+2.27%, +1.2) — PREV: 50.1
Moar Jobs
ADP Non-Farm Employment Change: +174K — PREV: -78K
Census Bureau Non-Farm Employment Change: +49K — PREV: -227K
Throughout the week, what was the best course of action as the markets approached all-time highs? Adding more? The contrary again. I was selling to the suits, gradually reducing my risk over time—starting off at +6% net-long on Monday and finishing +2% net-long on Friday; a simple, emotionless, disciplined approach preparing me for the next selloff where I’ll start to reload.
Rinse and repeat the tailing and topping process. Don’t top and tail as some of the suits did last week. That’s the key exercise here. Remember, markets are a dog-eat-dog world. Everyone is trying to be the first to buy and the first to sell. It’s a competition, not a free money fest, still, most forget that…
Concoda
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