The winners have attained a mind-set—a unique set of attitudes—that allows them to remain disciplined, focused, and, above all, confident in spite of the adverse conditions. As a result, they are no longer susceptible to the common fears and trading errors that plague everyone else. ~ Mark Douglas, “Trading in the Zone”
Good morning!
In this week’s Dirty Dozen [CHART PACK] we look at Japan’s Nikkei making 29-year closing highs, rank countries by their ability to innovate, pitch the long thesis for a little known Japanese powerhouse, and then discuss the technical bull case for the yen. Finally, we end with a chart of a bull flagging silver miner, a Price Thrust signal on the Qs, bitcoin sentiment hitting all-time highs, and a highly shorted AI stock with a technical setup to drive a forced covering rally, plus more…
Let’s dive in.
***click charts to enlarge***
- Japan’s Nikkei saw its highest weekly close since November of 91’ last week.
- Bloomberg Intelligence scored 135 economies on their propensity to innovate and absorb existing technology drawing on measures of institutional quality, IT infrastructure, the business climate, and human capital. They found that Japan, the U.S., and Germany show the greatest potential.
- There’s a number of overlooked, underpriced, well-run companies in Japan that we’re digging into. Murata Manufacturing (6981) is at the top of this list. Brandon wrote this company up last month (you can find the report here). The chart below is a quarterly.
This stock has incredibly strong secular tailwinds and a lot of room to rise. We’ll be initiating a position soon.
- Last week USDJPY closed at a four-year low. The 50-year monthly chart suggests it could go much lower still.
- According to BofA, Gold minus Oil annual net return just spiked to its highest level since 1979. Does that mean anything? Probably not…
- Speaking of gold… PMs may be breaking out again after working off most of their overbought conditions over the last few months. There’s plenty of strong technical setups in the miner space. Here’s a weekly of Coeur Mining Inc, (CDE). It just broke out of a 4-month bull flag.
- This chart from CS shows that the US typically underperforms when non-US Industrial Production momentum is greater than 3% — it recently surpassed 15%. This fits in with our cyclical USD bear theme which I’ve written about here. It’s time to start adding some international exposure if you don’t already got some.
- This chart via Bloomberg is incredible…
- Breadth perked up last week. @MacroCharts noted that “the Nasdaq 100 rallied +9.4% over five days — among the TOP 1% in its 35-year history. This was also the Nasdaq’s 2nd biggest Price Thrust since March 2009 *(the biggest was after the March 2020 low). Price Thrusts are usually seen after Major lows in the Stock Market… As a general rule, the stronger the initial price move, the more Bullish the longer-term implications for Stocks… As long as the market remains above the September-October lows, this is a potentially Bullish signal which could carry higher into year-end or longer.”
I agree with MC. You can find the bullish thesis we put out last month here.
- According to my indicators, sentiment and positioning are now biased long and are becoming a minor headwind for stocks. Though, as BofA’s B&B Indicator shows, there’s still plenty of room for sentiment to improve before it flashes a major sell signal.
- Bitcoin is in the full-on expansion mode that we said was coming. Sentix notes though that short-term sentiment is running a bit hot so we shouldn’t be surprised if we get a pullback or consolidation here. Sentix writes:
“With +55 percentage points, the sentix sentiment for Bitcoins reaches a new all-time high. At the same time, the medium-term strategic bias shows a willingness to take profit: the basic conviction cannot keep up with the exhausted mood and has lost 13 percentage points in the last 3 weeks… The price reaction has come about, now it is time to rethink: the price risks are increasing dramatically and the risk/return is becoming increasingly unfavorable.”
I disagree with that last bit though. The trend in bitcoin is just getting started.
- Brandon, our resident value ninja, tweeted out a list of highly shorted companies with strong technicals and compelling fundamentals. Ontrak (OTRK) is one of these companies and checks all the boxes. You can find his entire thread here.
Stay safe out there and keep your head on a swivel.
