I have a reasonably healthy obsession with plants. Most of my idle time lately is spent working the land to make it produce food and beautiful privacy. For years I’ve been stunned by the blooms from the hollyhock out front of Mothership. This perennial bares blackish flowers and they show up right around the end of the second quarter. They remind me of death and in turn it makes me expect the stock market to trade lower. I have to temper these mystical fantasies with data, otherwise I run the risk of going on tilt and losing a bunch of money. Therefore, I prepared my Sunday research this morning. As I always do. Only this time I was seeking data that would fit my narrative.
Spoiler alert: the data does not line up.
The PHLX semiconductor index keeps defying resistance. It recently reclaimed an old resistance cluster left behind in February and last week it reclaims what sort of looked like an “island top” formation:
As any regular reader of the humble Raul blog [hRb] knows, semiconductors are the key driver behind our secular bull market. They are the building blocks and vital components of the AI revolution that is sweeping earth as we enter the roaring ’20s—a period of economic prosperity the likes of which no human being has ever seen. The notion of recessions at this point is moot. Perhaps humanity will falter and regress cognitively. Our numbers may be culled virally. Humans will continually be less needed professionally, but economies will continue to grow on the backs of robotics and artificial intelligence. You can read more about this cornerstone of my investing thesis in this 2017 blog entry. As long as semiconductors are this strong, it doesn’t matter how many black flowers bloom, markets are bullish.
Exodus is bullish through Thursday. 95% of Exodus members struggle with the simple task of executing trades based off the simple signals generated by the incredible predictive engine The Fly built. Exodus remains in a bullish cycle so flowers, well their power is limited.
Last week the “right” sectors rallied. Nothing good comes from strength in the energy, utilities, staples or financial sectors. We need to see strength in tech and discretionary. All other sectors are shit. That is exactly what we saw last week, strength where it matters:
In 2020, the true leaders of the free world are the CEOs of major technology companies. If they succeed. We succeed. They are succeeding. Amazon is up 44% year to date.
Progressive thinking is creating value and being rewarded. There is a clear divide between what manner of thinking will be rewarded on this planet. Nationalism, racism, xenophobia—think like this and you will be poor and isolated and nobody will work with you. You might as well go live in a cave.
As you can see, all the data is bullish. Good humans are winning. Stocks are appreciating in value. Predictive engines are bullish. There is nothing to be bearish about beyond some black flowers in Mothership’s garden.
I have about 20% of my risk capital in SQQQ. I initiated the position late Tuesday and held it into the weekend:
Now I have to manage this trade without any concrete evidence to justify it. Just some mystical voodoo. Do you see how stupid this is? This is about equally as stupid as taking advice on a trade from anyone, especially anyone who has crossed over to stock market trading because they couldn’t find any sports to gamble on.
Hopefully this example of what not to do will serve as a lesson for all of yous. Do better.
I had concrete reasons to short the market last week.
This upcoming week I do not.
Raul Santos, June 21st, 2020
Exodus members, the 291st edition of Strategy Session is live, go check it out!