At the poker table, if you can pick up a “tell” on another player, you will be privy to information that can give you a greater edge in your decision making process. Suppose that you are holding a good, but not great hand. You are against only one other player in the hand. You had been playing with this particular player for several hours. You notice that when he has a weak hand, he does not mind joking around in a casual conversation with the players around him during the hand. However, when he was a really great hand, he becomes very serious, and blows off any small talk because he is focused on the action at hand. You can now use this information to form a more focused and cogent analysis before making a decision.
The same strategy holds true in the stock market. If you can isolate a few corners of the market that have been giving off tells as to the next big move of the broad indices, you will be working smarter. While hard work is necessary, it is not sufficient to crushing the market. You need to have a laser-like analysis, in terms formulating your strategy. Be precise!
Thus, I will offer my two best tells for the current market. The first one is $FCX, a stock I have talked a lot about recently. We know that they are a well run mega cap copper, gold and molybdenum miner. Despite the recent “death cross” on the chart, the stock was THE tell today, as it was up the whole day, well before the broad market decided to turn green in the final hour. Pay attention to my commentary on the chart, seen below.
My second tell is the Japanese Yen. While everyone is watching the Euro, do not forget that the Yen carry trade has been the premier vehicle for much of the risk appetite we have seen for many years now. The Yen has had an inverse relationship to the performance of risky assets. Oh, and for all of you “flash crash” deniers out there, look at what happened to the Yen on May 6th of this year, and you can go shove your fat finger up a pencil sharpener.
MIND YOUR TELLS!
Is it me, or do I see a symmetrical triangle on the YEN chart?
(from Flash Crash day to today)
Either way, both charts kinda scream “Bear’, don’t they?
Yup, both charts tell the story of weaker equities. Will be interesting to see how this unfolds from here.
Good points, cNw. Also, the Yen spiked BEFORE the flash crash — it was up minutes before the market plunged, IIRC.
Agreed.
You are marketwise. Nice work.
Some claim that copper even has a PhD in economics, so a rising FCX is definitely worth watching as a tell on the pace of a global recovery. So is SCCO, as they are highly leveraged to copper.
Of course, if people have access to the futures in real time, the price structure of HC (high grade copper) is worth monitoring, especially if the contango between the near and far months begins to narrow and eventually goes into backwardation. If my memory serves me, rising copper prices have been a leading indicator in every bona fide economic recovery since the days when King Leonidas shoved a bronze spear through a poor Persian.
When I look at the Yen, I see stronger Yen….and dead sheeple with their heads lopped off by samurai swords.
It’s bloody and gory out there.
I don’t think Leonidas “spear” was made of bronze…but point well taken.
Great post, as always sir.
I think the old saying was something like “the stock market has a roof of copper”. I can’t find references anywhere on the interwebs. It’s probably buried in some market book from the 1920’s.
There were a few other good tells.
XLF — was green at the start of the day and only reluctantly went red… only to get back to green quickly before the run.
OIH – when SPY dumped back down to new lows around 2:40 (the last drop before the rally), OIH had already started pushing up — it was acting completely differently.
FXE – similar to FXY — FXE was also green all day. And UUP, obviously, was down.
All combined… lots of tells.