“This plan, of betting only at a level at which I was emotionally comfortable and not advancing until I was ready, enabled me to play my system with a calm and disciplined accuracy. This lesson from the blackjack tables would prove invaluable throughout my investment lifetime as the stakes grew ever larger.” ~ Edward Thorp
In this week’s Dirty Dozen, we look at BTCUSD breaking out with bearish sentiment, Santa stats, talk Qs in BullQ regimes, disparate sentiment measures, and more…
1. BTCUSD broke out over the weekend and is making new highs (note: we’re long).
2. Positioning and sentiment, though, are still bearish which means more fuel for the trend higher.
3. Santa Rally returns for buying $NDX three trading days before Christmas and selling X days (the far left column) after Christmas via Quantifiable Edges (h/t ChrisD).
4. The Qs are trading in a Bull Quiet regime with accelerating momentum. This continues to be a market that you want to be long and buying.
5. And measures of intermediate-term positioning/sentiment show that there’s still plenty who aren’t buying this rally (both literally and metaphorically).
BofA’s Bull&Bear indicator fell again and is getting closer to giving a buy signal. Hedge funds have been underinvested for months and have a good track record of being a reliable fade. And finally, Charles Schwab’s STAXX indicator (a measure of real retail trading activity) is below where it was four months ago and well below the 21’ highs.
6. At the same time, we’re seeing survey measures from the Conference Board and Umich, which paint a very different picture (charts via @biancoresearch).
7. While Households now have a higher allocation to stocks than at any time in history (chart via BBG’s Simon White).
These are very long-term measures, so keep that in mind. Doesn’t mean much now. On another note, this is one reason we remain very bullish on precious metals over the long term: Their secular returns tend to track the inverse of HH equity holdings.
8. I’m still closely tracking the MAJOR compression regimes in USDCAD, EURUSD, AUDUSD, WTI Crude.
Charts below show monthly Bollinger Band Width in orange. A very big move is coming. As of now, it looks like that’ll be USD up and oil down. But Chinese stimulus, Trump USD policy, and a number of other things could catalyze a trend in either direction. We’re just waiting for the tape to tip its hand and then we plan to be aggressive (note: we’re long USDCAD and WTI).
9. This week I’m looking into NPK. You can read this thread on the bull case here (h/t to Collective member David B).
Thanks for reading.
