The Energy in Energy…

Jan 10

Most people believe high turnover is risky, but I think just the opposite. High turnover reduces risk when it's the result of taking a series of small losses in order to avoid larger losses. I don't hold on to stocks with deteriorating fundamentals or price patterns. For me, this kind of turnover makes sense. It reduces risk; it doesn't increase it. ~ Richard Driehaus

Good morning! In this week’s Dirty Dozen [CHART PACK] we note the Nasdaq’s critical inflection point, then talk bonds, incoming cold weather, cooking coal stocks, and other cyclical names, plus more…

The Nasdaq mini closed below the midline of its weekly Bollinger Band for the first time since the COVID bear last Friday. Downside follow-through this week would confirm a major trend break.

Looked at on the daily it's at the lower range of its 2-month sideways trading range and in a neutral market regime. A move below this support would open up the Qs to more downside.

This chart from GS shows that a bear market in growth stocks has been underway for quite sometime though.

It’s hard to see the action in tech/growth settling some until we see a low in bonds (high in yields). Bonds have now seen 5 consecutive bear bars. There have only been 11 instances in history where there was a 6th, and the follow-on 2-week bias skews bullish. If we see this play out again this week then that should help put a temporary floor under the Qs.

This chart from @biancoresearch shows just how rare the speed at this selloff in Notes has been.

The non-transitoriness nature of inflation is behind this move. There are signs that this should moderate after the 2nd quarter as spending reverts from durables back to more services and supply bottlenecks open up, though.

Steve, our meteorologist, has a note going out to Collective members later today but the gist of it is that the next few weeks are shaping up to be dramatically colder than normal in the US Northeast.

We’re already long some coal names but just flipping through some charts, there’s a lot of great technical setups out there. NRP is one of them.

Cyclical/reflation names continue to show the greatest technical strength. X has started buying back shares, management keeps raising guidance, and its chart looks ripe for a breakout from its 8-month sideways regime.

Dorian (LPG), an LPG shipper that we’ve written about often, is teeing up on the weekly charts.

WTI is nearing $80/bbl again but Spec positioning remains incredibly bearish… Also, the energy sector shows the strongest relative EPS trends out of all the sectors.