Welcome back, Meta-Traders.The markets favor those who pay attention. I pay attention to new all-time highs, particularly when they occur in combination with record revenues and record earnings. Nothing gets my juices flowing like when a stock breaks out to a new, all-time high. There’s nothing more bullish that can happen to a stock. It signals there are no sellers left and the price can scamper ever higher, “like a scalded chimp” as Jeff Macke likes to say.
I bring this up because we had new, all-time highs in a few of my stocks this past week such as Apple, HMS Systems, IBM and Yum Brands. Equities are straining to rally higher and investor sentiment is the perfect contrary indicator, with investor interest and volume at lows and exposure to bonds at highs. A free and easy US Federal Reserve, and record low interest rates are the perfect fuel for a bull market in stocks.
Friday’s jobs number ignited another rally with the number of unemployed reaching the lowest level since January of 2009. The broader indices showed strength across the board with the Dow moving out to a 13th month high. Emerging market ETFs EEM and EFA had 5 straight up days showing substantial strength in the Euro zone and worldwide. At this point, the all-time highs set back in 2007 seem within striking distance setting the stage for a move to new all-time highs in the major indices.
On the single-stock side, the upcoming IPO of Facebook has ignited enthusiasm among investors. It’s easy to look at Facebook and dismiss it as a fad. But in his letter to investors included in the S1 filing, Mark Zuckerberg draws a comparison between Facebook and the invention of the printing press. Facebook is a medium that is so transformative, it creates new industries and economies based on an interaction model that did not exist before. And with 800 million users, it’s a huge business. And when that stock first trades, 5 billion dollars in wealth will be created out of thin air. Is this a great country or what?
Forex was ugly this past week with losses in all systems except for COATL H1 and Sunqu Live. At this point, we have now given back all of the gains made in the first week of January. This is well within expectations, so no reason to change our system or strategies. It’s almost like you need to put on a different pair of glasses (or goggles) where you don’t consider short term performance. It took me a while to get it, but I definitely get it now.
One thing about equities is that they always go on sale. This typically corresponds to a geopolitical shock, usually occurring the in the middle east and taking a hit to equities. That will constitute another buying opportunity which is why I always keep about 20% in cash.
That’s all for now, check back tomorrow for part 3 in my series on Neural Networks and enjoy your weekend.
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