“Looking at portfolios, think deeply about process over outcome. If you do something the right way enough times, you’ll win.” ~ Dan Loeb
In this week’s Dirty Dozen [CHART PACK], we look at frothy sentiment mixed with strong internals in equities, before diving into breakouts in BTCUSD, USD pairs, and biotech, plus more…
1. “Was so weird Wednesday morning. Everyone coming out of the building who lives here seemed so sad, and yet all the worders going in to clean and fix stuff in the apartments seemed really happy.” ~ Tribeca co-op superintendent
2. From SentimenTrader “The S&P 500’s rolling one-year return just exceeded 50x the standard deviation of daily returns, the 2nd-highest in 25 years. Unfortunately, the pleasant conditions haven’t persisted for much longer over that span. For everything there is a season.”
3. Sentix notes that “Donald Trump’s election victory triggers a veritable frenzy of joy. Sentiment for US equities reaches a phenomenal level of +53 percentage points, marking a new all-time high (data history since 2001)! The optimism is focused very strongly on the US markets. Other stock markets are sending worrying signals.”
4. But BofA’s Bull & Bear indicator is still below the level required for a proper sell signal.
5. And our key market internals are strongly inflecting higher… So not much to do but stay with the trend and track internals and the tape for signs of spreading weakness that will indicate an inbound correction.
6. BTCUSD broke out from its 7 month compression channel last week. We are maxed out long and expecting this trend to move significantly higher.
7. I’m also paying close attention to the US dollar here. The long-term chart remains constructive and the price action is coiling like a spring.
8. Sentiment is in the 0th percentile, while aggregate positioning is bearish, and yield spread momentum is accelerating upwards.
9. We’ve been long USDJPY for a few weeks but I’m also looking to place a buy stop on USDCNH to see if it can pull us in long.
10. USDCAD also looks to be breaking out from its 2yr sideways compression regime. If this breakout sees follow through then this could be the start of a major trend.
11. We’re starting to revisit biotech. XBI is breaking out of an ascending triangle on the weekly.
12. And, as RenMac notes, the sector is marked by extreme bearish sentiment at the moment.
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