INTO THE TRADING WEEK, (ITTW) 23.03.15
Last week’s, ITTW really should’ve been called, ‘ITFW’, ‘INTO THE FED WEEK‘.
YT said,” The scrap of ‘Patient’ to the FOMC word heap is seemingly inevitable, so there is more in the statement that will be used to deduce what it all means. In all, please erase the word, so markets can get on with it!…. On with it might be the U.S Equities outcome after trailing Global markets big time in Q1. Despite the lag you see in the daily media between U.S and the soaring Global equites, its been a fabulous Q1 in YPT’s niche and beyond as noted last week,“This lacklustre S&P performance in 2015 is really not a concern here, our DAX Europe trade is +20% but most importantly, YPT had a great Q1 with our SMID growth niche stock picks giving us a plethora of large % gainers”.
Last week with a little help from our friends at the FED, we put an exclamation mark on the Q as nearly 50% or ~30, YPT Shadowlist (PREMIUM + PUBLIC ) stocks ran > +4% on the week. Most of these were noted daily on our ‘INTO THE TRADING’ morning call to start and finish the week.
Biotech, NASDAQ: ONCE +20% ATH, NYSE: NVRO NASDAQ: MANH NYSE: PAYC NYSE: UA NASDAQ: AVGO NASDAQ: FTNT NYSE: HUBS NYSE: TYL NYSE: LXFT all between +5-15% on the week.
All in, sometimes you may get what you want and more, just by saying the magic word,”PLEASE”. Sometimes you even get more than you bargained for as was the case with FED this past week. You only have to look at the performance of the roaring USD and the instant sell reaction post FED, yes then the rise back on Thursday, but once again the fall on Friday after more investor deliberation. This is indicating the initial sell reaction may be the right one!. What’s all the commotion?. Well..the biggest headwind facing U.S equities was the strength of the USD on earnings. It was already beginning to rear its ugly head and the FED simply acknowledged this potential momentum loss by revising down the dots. Instead of 3 cuts, 2 cuts for ’15 and more dramatic changes for ’16/’17. Yes, let’s not forget to say thank you as well for removing patient to be equally polite. Do note, hot data can shift this back to June, instead of the new September lean as FED is now truly on a DATA fix.
IITW, the focus here will be to see if the FED has curtailed USD torrid rise and slowly begins to ease pressure on U.S equities (multinational) heading into the earnings season. Also in focus here is if it’s a ‘DIFFERENT BOWL, SAME SOUP?‘ scenario with Small Caps breaking out and signalling a new leg higher. By ‘same soup’ or not we mean is this time going to be different then the previous 2 times this year (late Dec into Jan and Feb again) where IWM/RUT were ‘supposedly’ breaking out as well..
Interestingly both times, YPT called the 2 trips a short term top with our market gauge leading as in the opposite direction of the chartists views just before NYE’15 and after with our ‘Wall of Worry’ case coming to fruition in the latest fail that saw market drop to SX 2040. Our market barometer also caught this 2040 support on the nose and eventual reversal for the market, (March 10-12) leading this rally back over 2100. During this reversal we were throwing many potential plays as listed above to members, especially for the 3 days leading into a potential hawkish FED decision without blinking twice.
MARCH 10, NASDAQ INTERNET INDEX HOLDS SUPPORT and DAYS FOLLOWING..
In all, it’s a little early to call for a 3rd Small Cap fail, purely because we are heading into months/ Q end and repositioning in currencies will likely take hold, potentially spreading to equities beyond the normal window washing/ dressing. The crowded USD unwind consequences should be interesting to watch on all asset classes (inc. Oil), if its has truly peaked and been capped by the FED. The only slight hesitation is this breakout smells like end of February move to the S&P top off a dovish FED and Greece agreements+(Merkel involvement +ve ) as last week. Potentially there is more positive from the former (Q end /repositioning) then the 2 similar factors helping the rally to close the week.
Simply, YPT will sail on same course as last week and let our barometer and Shadowlist guide us until it indicates time to jump ship and concentrate on new earning plays this upcoming Q.