Seeking Alpha

The Markets Speak: And They Are Uneven

by: Harry Long
Harry Long
Arbitrage, quantitative investing, strategy-based indices, systematic strategies

Some asset classes and sectors are trending upwards.

Others have stalled out.

Here's my effort at separating signal from noise.

A funny meme has been making its way around institutional trading floors.

The popular sentiment is that a confusing policy environment, turbulent politics, and an unstable geopolitical situation have made investing difficult.

I'm certainly empathetic to this point of view. However, if we step away from the day to day noise, and simply focus on the markets, some trends do emerge.

I'm a factual absolutist. And for me, factual absolutism in a pari-mutuel game, such as the financial markets, necessitates paying attention to trends.

Here's why: fundamental data is widely reported. However, market prices show the reaction to that fundamental data. And those market reactions, over time, create the winners and the losers of the game.

While I don't use any type of interpretative analysis like Avi Gilburt, I do use my Zomma Directional Algorithm to quickly take the market's temperature. The algo does not use form-fitting. It uses the same settings on every market.

Here is how to understand the results:

1. When the yellow line crosses above the green cloud, it signals a buy.

2. When the yellow line crosses back into the top of the green cloud, it signals a sell and a move to cash.

Note: The algo is not designed to create short signals.

Let's start with Chinese real estate (TAO). It looks like those empty residential towers are starting to create a drag.

The S&P 500 (SPY) is still long, by the skin of its teeth, despite the impeachment rumblings (update, algo signaled a move to cash at 3pm est today).

The Nasdaq-100 (QQQ) has signaled a move to cash wait and see mode.

The pipelines (AMLP) looked like they might be a great bargain after years of their own industry bear market, but that hope was short-lived.

Sinopec (SNP) has still not caught a bid even though it sports a yield north of 9%.

The inverted yield curve has still not destroyed the financial sector (XLF), which is still holding on.

Utilities (NYSEARCA:XLU) seem to be trending (?!). Seems that the market has been using them as a synthetic proxy for bonds, reasoning that they can raise their interest payments over time. That reasoning is not crazy in a negative yield environment for Europeans if they wish to test the waters on our shores.

Are Facebook's (NASDAQ:FB) regulatory troubles behind it? The market doesn't seem convinced.

20+ Year U.S. Government bonds have been partying like 1999. However, have you seen the broken upward parabolic trend?

High Yield (HYG) "junk" bonds are moving sideways. The Armageddon has not come yet. Mirroring the S&P with less gusto.

Oil seems unconvinced by both declarations of economic prosperity and of saber rattling in the Middle East.

Just like the 20+ Year Government Bond, gold (GLD) went parabolic, then broke its trend, so it has gone with gold, which had been a bright spot. Gibson's paradox anyone?

But silver (SLV) looks worse.

The market seems hopeful about the new Apple (AAPL) iPhone.

Is Amazon (NASDAQ:AMZN) stalling?

Coffee (JO) catching a bid?

As is corn (CORN)?

As is wheat (WEAT).

And cotton (BAL).

And agricultural commodities (RJA) as a whole.

The boom in low volatility stocks continues (SPLV). So 90s.

The dream that was cannabis stocks has died (MJ).

Another mini-panic in Bitcoin.

The dollar index (UUP) gets a bad rap, but if you're selling negative yielding European debt, dollars don't look bad.

Stay tuned for more. If you would like notifications as to when my new articles are published, please hit the button at the top of the page to "Follow" me.

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Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight. In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. For example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.