Alright you degenerates...
It’s pretty funny how as soon as the market shows signs of strength, the headlines suddenly flip to a more positive tone. Articles titled “The Fed Is Going To Send Us Into A Depression” magically change into “How The Fed Has Perfectly Navigated This Economic Storm.” As we like to say, a shift in price action is swiftly followed by a change in sentiment. After CPI and PPI came in lighter than expected, the “Fed pivot crowd” came out of hiding and unleashed a flurry of messages on Twitter about the upcoming soft landing. This attitude was reflected in short-term sentiment indicators across the board. The latest AAII sentiment survey showed an increase in bullish sentiment, bouncing from 25.1% to 33.5% this week. This marks the highest reading on the survey since the end of 2021.
Unfortunately, one long-term sentiment indicator we’ve been paying attention to hasn’t shown any signs of capitulation. Global equity flows continue to see net inflows weekly, illustrating that investor confidence in “long-term plays” hasn’t been rattled. While this may bring a smile to your face, it’s certainly not ideal for the technician looking to find a market bottom. In previous market bottoms, such as 2008 and 2020, global equity flows turned negative before the recovery began. We are nowhere near that point, with inflows estimated to be around $1.1T since 2020. While this is only one indicator, it would be unusual for the market to bottom at a point where inflows are elevated. You hardly see the average retail investor feeling good about their investments at a market bottom.
Watching individual names will be crucial if the market stays range-bound. We’re starting to see flickers of sweeper activity in under-the-radar names such as $AMKR, a lesser-known semiconductor name that has ripped in recent weeks unbeknownst to most traders. The alpha will likely not be in last year’s leaders but in the laggards starting to make a comeback. While the Riff-Raff has their eyes glued to FAANG names, the smart money will be quietly honing in on opportunities in the stocks no one is watching. Fortunately for you, we’ll be keeping tabs on what names the smart money is buying on the Wiseguy Alerts Board.
Hedge Funds are still net short but covered a tiny portion of their position last week.
Industrials, Materials, and Financials soared higher as investors began to warm up to economically sensitive names again. Admittedly, the cyclical trade is a bit overheated in the short term, but it’s important to note that these names have been neglected for months.
We switched it up and had our first in-person guest Kenny Polcari join Chris Cady at his office in NYC.One of our backend guys, Matt Greinacher, asked Chris and Kenny to share stories from their days in the pit and how younger traders can learn from the previous generation.
Jesus warns about chasing some of these names that have rallied significantly off the lows. Watch the Flow Show to see what Wall St. Jesus is looking for from a short-term pullback.
See you mañana!