The market is pretty fascinating right now. It is currently featuring 100-point intra-month S&P swings, a solid rally in eccentric commodities like coffee, currencies bouncing around like ping-pong balls, and wild technology M&A speculation. What’s not to like?
My bearish thinking is beginning to morph into a more bullish tilt. The reasoning for this is three-fold: 1) The Feds are printing more money 2) Technical “Commitment of Traders” (COT) reports show institutional buyers getting more bullish and retail investors getting more bearish — usually a bullish indicator 3) it’s looking like the bears have had trouble taking the market down in September, which is when they usually take it down.
Now, as always, I try to be agnostic and flexible, letting the market tell me whether I am right or wrong. I also try to concentrate my positions in ares of strength, which as of now including small-to-medium growth companies, precious metals, and utilities. As of right now I am neutral on the market in general. But I would buy strength in particular things that are breaking out. There are many areas breaking out which I will highlight below:
Small-to-Medium Tech: Currently the market is pricing in a premium for small-to-medium sized technology companies with growth. Interesting tech plays making new price highs today include Tibco Software (TIBX), Netflix (NFLX), Intuit (INTU), Riverbed (RVBD), Arm Holdings (ARMH), and F5 Networks FFIV.
Silver & Gold: This continues to be the bull market of the multi-decade. And many institutional managers are still missing it — so there is plenty of upside. They are printing more money which is good for silver and gold. Silver looks like it’s going to take out a high for the last 25 years and gold is threatening an all-time high. Very bullish for the precious metals.
Utilities: Utiliities have been very bullish lately. My theory is this is people seeking income. who are being pushed out of the bond market because of the low yields. Some interesting dividend utility plays with bullish price action including Verizon (VZ), AT&T (T), Great Plains Energy (GPX), Consolidated Edison (ED). All of these are paying yields of at least 3% with the telecoms paying as high as 7%. Not a bad alternate to overpriced bonds if you think about it.