The First Half of 2017 Proves to Be Stellar for Tech, Highlighted By Breakout in $BABA

If you condense everything about the first half of 2017, Wall Street bought the dips in China and healthcare, nibbled on some Trump inspired construction ideas, and furiously bid up the free cash flow tech giants to new heights.

While everyone was focused on Amazon, the clear breakout was BABA, gaining more than 60% for the first half — adding over $150b to its market cap. For years since coming public, Alibabba underperformed the market. I think the set up with people selling Chinese stocks heading into the New Year, fearing a trade war, coupled with their fantastic growth and size, truly gave money managers the excuse they needed to position heavily into the name.

In addition to BABA, several other Chinese related tech stocks shined, including NTES, YY, MOMO, WB and BABA competitor JD.

Both the S&P and Dow gained ~9%, while the tech heavy Nasdaq soared by 17%.

Amongst tech, none did better than large cap tech, in addition to some semis. One notable social media stock, rarely discussed, TDOC, crow-barred higher by 111%.

Here were some other bellwethers and their YTD returns: IAC +66%, NTDOY +70%, TSLA +70%, FB +31%, AMZN +30%, AAPL +25%, GOOGL +18%, MSFT +12%, NVDA +36%, ORCL +31%, AVGO +33%, PCLN +28%, NFLX +21%, PYPL +36%, CRM +27%, ISRG +47%, BBY +37%, SNE +36%.

The first half also provided some runway for some new, up and coming names in the tech space, such as W +117%, SHOP +102%, OLED +94%, SQ +72%, ANET +55%, VEEV +51%, NOW +42%, WDAY +47%, AAOI +170%, SGMS +86%, FIZZ +88%.

Think of the enormous gains in market cap some of the bellwethers just underwent. Stocks like PCLN, ISRG and AMZN continuing their torrid paths upwards, almost unabated for years. It is truly something to behold. Also, the fact that something other than biotech did well in the smaller cap names is extremely encouraging. Naturally, there were the biotech winners like KITE and PBYI, but there was also W, MBLY and STRP got bought out, 3-D stocks roared, a soda pop company nearly doubled and application software stocks defied gravity.

The Ebay spinoff Paypal broke out. Newcomers W and SHOP captivated momentum traders and a very old story stock finally did some significant business, which helped its shares double (OLED) for the half.

Commodities that enjoyed an upswing were palladium (+23%), Lithium (+19%), Timber (+15%), Wheat (+12%), Livestock (+11%), Gold, coal and copper (+7%).

On the downside were department stores (-34%), Oil and Gas (-39%), Auto stores (-27%), Home Furnishing stores (-24%), Food Wholesale (-23%).

Deflation was rampant in some raw commodities, such as sugar (-32%), coffee (-14%), cocoa (-14%), soybeans (-6%) and cotton (-5%). Natty got crushed by 28% and oil shed 14%.

Overall, the top sectors were in healthcare and tech — both sporting double digit returns. I suppose Trumpcare isn’t going to be deleterious to industry at all. In fact, based upon the +26% returns in healthcare insurance stocks for the half, they stand to make even more money.

Another interesting industry was ‘General Entertainment’, up 29% for the half. These are stocks like CCL, RCL, SIX, FUN and SNOW. People have money and want to be entertained.

Hell, even solar stocks rose by 22%.

As long as you avoided the basic material names and tried not to get sucked in on the Trump infrastructure promises that offered hope to a beguiled steel sector, you did well. Whether we can sustain these gains and add to them is another story. Often times investors like to buy beaten down sectors, while selling the winners. Let me remind you that time is a flat circle. It doesn’t abide by your calendar and offers zero correlation to dip buying adventures. More often than not, sectors that are hitting new highs comntinue to make new highs and vice versa.

Good luck in thw second half.

For the second week in the row, small cap stocks crushed large cap. The smaller you go, the higher the returns. Hence, I find myself, once again, invested in degenerate small caps. I made some minor tweaks to my portfolio this morning, such as reducing my TLT position and selling out of gold.

The overarching consideration is the fact that most good companies are losing market value. All of the money is being made in speculative stocks. Therefore, that’s where my money was placed.

For the 9th week in a row, I crushed the SPY, which shed around 0.65%, compared to my breakeven.

NOTE: I will be updating my semi-annually managed portfolio in Exodus today, predicated on GARP (growth at a reasonable price). It truly sucked wind the first half — making only 1.5%, compared to the 9% gain in the SPY. I was positioned poorly and will try to make amends in the second half.

The left has gone apeshit over the Trump tweets. Then again, since they’re always going ape about something, it’s fair to say they’re in a perpetual state of ape. The President shouldn’t be wasting his time tweeting about meaningless people in the media. He didn’t get elected to pick fights with people who don’t affect policy. He’d be better off shitposting about Nancy Pelosi or ‘Crying’ Chuck Schumer than worrying about the media.

While the media is an amalgamation of reprehensible people, who use their monopolistic control of the airwaves to foment discord to promote cultural degeneracy, it should not be the job of the President to take them down. That’s what surrogates are for.

At the end of this clip, Tucker Carlson discusses this in a little more detail, talking about the President’s mandate and how he’s squandering it by wasting time on nonsense like this.

Although I find this all very amusing and gives me endless hours of joy, it’s unproductive. I am not frightened or saddened by any of this — because I’m not emotionally disconnected from the world and know that we’re not living in a dictatorship. Trump is one man in a sea of filthy deep state, lifetime bureaucrats. I think it’s fair to say, after seeing how the ‘intelligence community’ has responded to the elections, the President isn’t nearly as powerful as people thought.

Watch.

Well, you wanted volatility, now bathe in it. The Dow is off to a raucous start, higher by 100 whole points. Both the NASDAQ and SPY are doing very little — taking a break on a genteel Friday morning.

I’ll be re-jiggering my portfolio today, after some analysis. I have a busy morning ahead of me — so don’t bother me with any inane questions. Oil is bouncing today — because Dennis Gartman said it was going to zero (he literally said that).

The President of the United States is mentally ill, according to many on the left who are angling to have him removed from office. And, the President of S. Korea is in DC to discuss how best to survive a nuclear war with N. Korea.

Also, and I think this is noteworthy, Nike is shrply higher after announcing they’ve bent the knee to Amazon. We are well on our way towards total and complete annihilation of the shopping mall.

Donny took the low road, because that’s what gentlemen of his caliber do. Whilst attempting to teach America’s youth about decorum and how to handle adverse conditions, Mr. Deutsch decided to scorch earth his teevee career and partake in a vulgar rant against the President.

Fun Times.

BONUSI: Moron in the background cheering him on.

BONUS II: He challenges his to a schoolyard fight too!

Mark Levin’s take on this kerkuffle, saying MSNBC has a problem.

You’re gonna love this ‘smoking gun’ story the WSJ just shilled — attempting to create another avenue for Robert Mueller to investigate.

Shane Harris should be ashamed of himself for such refuse.

Get this.

An 81 year old man named Peter Smith attempted to recover Hillary Clinton’s 30,000+ emails by scouring chat rooms and talking to hackers. The WSJ claims he might’ve emailed the Flynn’s once or twice — spoke highly of Flynn Jr., but ultimately was unsuccessful in finding the emails that Hillary erased from her server.

Wait there’s more.

Nah, just kidding. That’s all there is to it.

Here’s Chuck Todd talking to this animal Harris about his bullshit story.

Via WSJ:

Before the 2016 presidential election, a longtime Republican opposition researcher mounted an independent campaign to obtain emails he believed were stolen from Hillary Clinton’s private server, likely by Russian hackers.

In conversations with members of his circle and with others he tried to recruit to help him, the GOP operative, Peter W. Smith, implied he was working with retired Lt. Gen. Mike Flynn, at the time a senior adviser to then-candidate Donald Trump.

“He said, ‘I’m talking to Michael Flynn about this—if you find anything, can you let me know?’” said Eric York, a computer-security expert from Atlanta who searched hacker forums on Mr. Smith’s behalf for people who might have access to the emails.

Emails written by Mr. Smith and one of his associates show that his small group considered Mr. Flynn and his consulting company, Flynn Intel Group, to be allies in their quest.

What role, if any, Mr. Flynn may have played in Mr. Smith’s project is unclear. In an interview with The Wall Street Journal, Mr. Smith said he knew Mr. Flynn, but he never stated that Mr. Flynn was involved.

Mr. Smith said he worked independently and wasn’t part of the Trump campaign.

Mr. Smith passed away recently. Thank God he isn’t alive to learn about this nonsensical story.

I am a lucky man. I am entreated to a rare form of entertainment on a daily basis, one that always surprises me without fail.

During his first press conference since calling out ‘Psycho Joe’ and ‘Low-IQ, Bloody Face Brzezinski’, Trump announced a new pipeline to Mexico that would go, mind you, ‘right under the wall’ — effectively defecating on our nice Mexican partners. And, he also managed to squeeze in another ‘CNN fake news’ jab.

This is surreal.

Well, what are you waiting for? Get in.

Exodus isn’t flagging oversold for many semis yet, but it is flagging oversold for the main ETF, SMH — with flawless, peerless, stats to boot.

Observe. Here is the track record for our algorithms over a 1-10 day trading period. Out of 10 previous instances, we were proven correct all 10 times for an average return of 3.33%.

Here was the last oversold signal, May the 18th.

Out of all the semis subsectors, the equipment space has been hit the hardest, currently in correction territory — down by 10% over the past month. Here are the larger capped stocks in the industry.

NOTEWORTHY: Here is a look at the Exodus oscillator, which essentially takes the mean reversion signal to a visual level, compiling every stock in the industry to give you a look at what oversold looks like. Notice the peaks and valleys? That is not price action, but our mean reversion engines analyzing if the sector is overbought or oversold. I promise you, juxtapose it against price action and you will find a very impressive correlation.

My gut instincts suggest say away from semis. Then again, human emotion is subject to all sorts of errors, rooted in the rigors of our lives. Maybe my morning coffee sucked, soiling my perspective on everything from today’s workout to the dog pissing on my $10,000 rug to the price action in semis.

Nevertheless, the data is impressive.

NOTE: Here’s another ETF that’s oversold — inverse VIX — XIV.

UPDATE: Micron sees Q4 $1.73-1.87 vs $1.60 Capital IQ Consensus Estimate; sees revs $5.7-6.1 bln vs $5.63 bln Capital IQ Consensus Estimate

Technically, when the dollar weakens monetary policy is easing. Lower rates is conducive with a weaker dollar. The opposite is true when the Fed is undergoing a tightening program, such as now. This usually rings true, but not always.

The dollar index continues to slide, off by nearly 7% for the year. This is precisely what the Trump administration asked for. Well, they got it.

Euro vs Dollar

On the other hand, yields have been rising over the past month — countermanding the move in the dollar. I can’t make any sense of it.

The 2s and 10s are now at a 90bps spread, which is a positive side note for banks.

The positive spin is this. The weakening dollar is helping US exporters compete and the minor blip in rates is insignificant in the big scheme of things. If anything, the inflation in the yield spreads lends to an increase in profitability in the banking sector, permitting them to take a pole position in the market, snatching it from over-owned tech.

Maybe today’s sell off isn’t so bad after all. Consider the fact that markets have been infiltrated by untrained vagrants, mountebanks keenly fixed on a profit angle without a gameplan in place to deal with adverse conditions. Thus, we are seeing a flush out, coupled with a rotation into banks and under-owned oils.

Let’s see how the days will end. It’s not the end of the world just yet, unfortunately.

The tech heavy NASDAQ is leading the fray down the toilet bowl. The Coriolis Effect has affected a wide basket of sectors — with 80% of stocks lower for the day. None have been damaged more than high flying semis and tech stocks, however. The distribution is heavy and the pain for those who top ticked palatable.

Amidst the carnage, it’s important to take note of the mega cap stocks, since they’ve served as hubs of liquidity and profit for our beloved hedge fund industry. The entry into these stocks was extremely accommodative during periods of excess. However, if we’re entering into a summer lull, you will quickly find the funnel narrowing as traders take flight — serving as a noose of sorts for those desperate to get liquid and stem the bleeding.

According to Exodus, there are roughly 100 stocks lower by 2.5%+, whose market caps exceed $10b.

Some are attributing today’s sell off to a ‘rotation’ out of tech into banks and oils. This makes some sense, since the yield curve has recently widened from 78bps to 90bps; but the oil sector is beset by a horrible price of crude. If the price of WTI doesn’t continue bouncing, this entire rally in crude will be revoked inside of a few days, or less.

On the extreme upside is volatility, higher by 40%. That $10 level has been a level of support. In the big scheme of things, the $14 level is still extremely low.

Both UVXY and TVIX are higher, but not nearly as high as one would expect — given today’s monstrous spike in VIX.