Markets Update

The stock market is shacking off a lot of uncertainty indicating no short term reason to expect sideways or bearish price action. We’re at 33% long exposure to long equities (with a normal range of 15% to 50%).

Chasing strength in the stock market is a bit risky at this point, but we can turn our eye toward the weaker stocks in the weaker sectors. Often these drop harder if the market tops out or corrects.

Energy (XLE) and Materials (XLB) stocks are the two weakest sectors.

  • Weaker players in energy : XOM, CVX, MPC
  • Weaker players in materials: PPG, DOW, ECL

Besides long treasuries and bearish options structures, some bearish exposure to these names can help diversify and balance a net long portfolio.

Bitcoin futures crossed above the 200-day average with increasing volume and open interest. The price has held above the 200-average for a couple of sessions. 

Many market participants use the 200-day average as a trend filter and adjust their bias based on this. After being flat from 10k, I’m in a reduced size position trade (1/8th of what I was in the last trend above the 200-day). I’ve also switched over from Coinbase which charges about 1% per transaction to using GBTC as a close proxy. This is an OTC (over the counter) instrument and doesn’t qualify for $0, but it’s certainly better than $100 in fees per $10,000 traded.

Crude’s sharp pull back followed a low volume/conviction rally indicating that this is more likely the end of a correction than the start of a bearish trend. Neutral positions (balanced iron condors or flies) are doing well and still valid for entry right now.

Bonds are doing what bonds tend to do during a strong economic cycle: Not much. Slightly inverse correlation to stocks, but not tanking. I prefer owning intermediate term treasuries (IEF, VGIT) over bonds (TLT) and have some excess cash there instead of in, well, cash.

Gold has pulled back a little but still a solid up trending market.

We get into more details on sectors and portfolio strategy in our Group Mentoring