I turn dials and fiddle with knobs to hone in on harmonic rotations
Joined Oct 26, 2011
3,546 Blog Posts

Q2 scaries: so many red flags yet we continue to rally

I have a long working list of reasons this market shouldn’t (the most dangerous word in speculation) be rallying, yet here we are again, just a 150 points or so from all-time highs on the NASDAQ.  The PHLX semiconductor index is already there.  This weekend more reasons were added to the ‘should not be rallying’ list like the continued leadership by the Materials sector.  What’s up with that?  Is inflation starting to be a thing, in a bad way?  Headlines are scary too, way too rosy, look at this hubris from Barron’s:

So yes, I am cautious.  But the system is the system and IndexModel, the model I built with brawn and raw exchange data is my only faithful guide during my active campaign to extract fiat American dollars from the global financial complex.  And IndexModel again signaled bullish this Sunday.  Therefore my directional bias these next five days is higher.

If we believe the markets to be a wholly efficient mechanism which has priced in all known information, then there are very few factors we need to consider before making a decision to buy or sell.  In reality, all we need to monitor is the way some goods are currently auctioning.  It is the flow of orders that happens in real time that gives us the relevant information we need to make day-to-day entry and exit decisions.

When it comes to investing, it helps to hard wire some assumptions into place. Things that only need to be reconsidered infrequently and ideally when you are high atop some mountain or way out in the ocean.  Some of my hard wired assumptions:

The Federal Reserve is the most powerful entity in the world.

Millions of W-2 employees blindly feed money into the stock market every pay period and their entire retirement is dependent upon a thriving stock market.  To placate the masses, The Fed will keep this puppy propped.

Technology has changed the pace and shape of economic cycles, and right now we are on the hockey stick growth curve portion of a Moore’s Law-esque chart (see: Let’s talk about AI and crocodiles for more info).

Baby boomers are finally losing control.

The economy is a zero sum game.

Nature always wins and is indifferent.

Market timing is possible.

Dollar cost averaging is easier.

With those rules in place, I only want to invest in cults.  If Scientology had a ticker you best believe I would own it.  Cults I will always have exposure to: Apple, Amazon, Google, Tesla, Adobe, Goldman Sachs, Twitter, Microsoft, bitcoin, longevity (CRISPR, etc).

Back to trading.  Trading is not investing.  You cannot dabble in trading just like you cannot dabble in mixed martial arts.  There are people like me who take trading very seriously.  There are thousands of hours of research, reams of data, planning, and thousands of hours of devoted screen time behind every trade I take.  I am ruthless and fast, like a fox, because the competition has more resources and plays as dirty as they can.  When you step into an arena like electronic futures, nothing else matters but the auction and mental clarity.  Distractions kill.  Hubris, kills.  Errors, kill.

To trade you need private office space fitted with some decent machinery (unless you’re sharing a space with other fully devoted traders).  You need full, distraction-free autonomy for at least 2-3 hours, lots-and-lots of money to lose while you learn, and a commitment to the craft.

Anyhow I am rambling.  Sunday research is complete, it is cautiously bullish heading into the second full week of Q2, and pretty much every thing we need to know will be seen on the PHLX semiconductor index.  Be sure to check out the morning trading reports, which I post around 9am New York.

I am off to shake away these Q2 scaries by digging some holes in the yard.

Cheers and trade’em well

Raul Santos, April 7th, 2019

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