I’m pressed for time today, but I wanted to pass on a couple of thoughts given the move on todays market.
The VIX is getting close to another trade entry point
A contrarian indicator, the VIX is getting close to the point (near 20, gold horizontal line on chart) where I noted on this blog I entered for a neartermed profitable trade. But even if you don’t like to speculate on VIX instruments (and its understandable if you don’t want to – its a risky game), you can appreciate that a low VIX implies a contrite market. And that’s a bad thing. Risk may be approaching as the market flirts with all time highs.
Pot rallied, time to take profits
Also on the blog noted above, I presented an argument for buying marijuana stocks with a focus on the Canadian names. I noted that a paired trade might be to own some oil and some “pot” names – A Dem win would be pot-friendly, a Rep. win would be oil-friendly. We bought the Horizons ETF, seen below. We had a target of $8-9, per the chart. I sold it this morning in our Aggressive Strategy at about $8. When stocks move too quickly, it makes me nervous.
Oil, reopening stocks, and metals just popped. Now what?
Everyone is excited about a potential vaccine coming out of Pfizer. The stock is up, but more importantly – the “old economy/ go outside” stocks and even value / dividend stocks are up huge today.
QUESTION…what have I been POUNDING THE TABLE ON LATELY???
ANSWER: I believe that this is the beginning of the move to value/reflation stocks. I’ve been harping on this since the late summer. Just read ANY of my blogs over the past 3 months to see that I’ve been on this strategy like flies on poop. I hope you’ve been listening.
After Pfizer noted success with its vaccine today, the market moved hard on the re-opening (go outside) names. More to come, methinks, although there will be pullbacks along the way. Depending on how the balance of power in the senate turns out, there could be a $1T to $1.5T fiscal deal with Biden in February. We look to buy the reflation on dips; Resources, Agriculture, and Energy names. Point is: leg into these stocks, with a portion of your portfolio. Not just energy and mining. Look at value, old economy, and reopening names like entertainment, travel etc.
BearTraps research makes an interesting point: “Biden will have to appease the green crowd with “executive orders” which should further add to a supply deficit issue for crude.” Good for the producers, finally! And before you ask – yes, there could be some tax loss selling coming, but if momentum continues in energy names, you may not see so much of that as I originally anticipated. So, don’t be too hesitant to buy on minor dips. We bought a little last week on a dip. No crystal ball – we didn’t see todays move coming. If we did, I would have bought more!!!
I’ve noted recently that I see oil as one of the great contrarian trades in this market. WTI will likely be higher a year from now as we reopen, fly more, turn around testing cheapens, and vaccines arrive. A smart strategy is to buy into quality re-opening names (if you haven’t already been doing so), including energy. The sector is building a base. Its not out of the woods yet. Plenty of time to pick your entry points. It probably wont be a smooth ride. Lots of supply comes in on the XEG chart, below, near $5.50 – $6.00. Keep an eye open for a blow-through that level. Then we are in for a ride. Until then, its going to be choppy, so we have time to get in.
Is your portfolio positioned for the next market shift?
Perhaps you agree with me that there may be a massive shift in the markets away from the overweight and overvalued technology and “stay inside” names back into reflation, and value names. If you, or your friends and family are not protected against the coming shift in the markets, do yourself (or anyone who may not be well positioned) a favor. Contact us. We’ll explain how we can manage your money as prudently and conservatively as we do ValueTrend clients. Feel free to send the link to this blog to your friends and family. At the very least, they will gleam some investment ideas from it.