We made two videos to discuss the details. One pre-market where we share technical and quantitative things about the market. One tracked the last 30 minutes into the close and we thought was happening at the higher level. Enjoy. I think we found and shared some insights.
How did our CQNS UP run do today? Pretty well. One up, the rest down and the median return was 3.55%, slightly higher than the $SPY (our benchmark) at -3.26%. Yesterday it outperformed the $SPY significantly during the trading day (it was an up day).
By Jeffrey Cohen, Investment Advisor Representative
April 28, 2022
Stocks reflect company valuations & significant information. Companies report important info to the US Securities and Exchange Commission (SEC).
Start here when looking to buy a stock. 4 easy steps:
1. Type "sec edgar search" in browser
2. Type ticker symbol into search bar
3. Select a filing (usually about 1 x month)
4. Read & think about it. Could create a spreadsheet to come back to.
Years ago I read a quote by a younger Jim Cramer who said that picking and holding stocks is a full time job for professional investment analysts. He recommended spending 1 hour / week per stock you hold. This is one great way to spend that hour, along with browser web searches on their key products, jobs posted, and company information. We also suggest listening to earnings calls and reading earnings call transcripts.
For those, like us in the past, who don't have time for this, the best thing to do is to hold a passive fund that is widely diversified, like the S&P 500 Index ETF ($SPY).
S&P 500 Daily Trading Range is up to levels that reflect market turbulence Definition: (High minus Low)/Open
Liquidity is drying up
Markets like turbulence
News really is that interesting & unique every day
Big bets in dark pools
War & Politics
This is not a good sign for the overall health of the market.
Fear of missing out (FOMO) is not that expensive.
It is ok to wait if/while the market falls further.
As we have posted before, there are many stocks on sale today. These are stocks that are down 10% or 70% over the past year and you may be thinking that these are bargain basement purchases. They may be (we think we might like SLQT, doing DD), but likely these stocks will be cheaper in a week or two.
By: Jeffrey Cohen, Investment Advisor Representative
April 28, 2022
Yesterday we enhanced our code-base and added a few things to our model. It helped, and we found more insights. We also made a video pre-market. Rambled on about the markets including stocks, fixed income, and how we see the indices performing. Then, 20 minutes in we started sharing real content. We shared tickers, new ways to view stocks, and some very interesting things for traders and data analysts alike. Technical things...
Hope you like the video, and will send out the white paper to our mailing list, and a few friends via US mail.
If you are interested in becoming a client, our brochure is available for free and without logging in on our homepage.
Good luck today to all,
I may transcribe this. Good insights today from the model.
by Jeffrey Cohen, Investment Advisor Representative
Ran our CQNS UP and DOWN runs
KTA: Down run similar with a few new names. MEME stocks (high volatility) are out there.
We see the same stocks maintaining their higher volatility status, with a few new names appearing.
Swing trader's paradise for daily trading, with common or calls/puts.
More diversification needed for long portfolios, and add QQQ names. More large technology companies making the list (showing tops or consolidation which reduces volatility).
UP run maxed on the same 8-stock portfolio. It also found larger portfolios (3 to 42 stocks equally held). These portfolios have 6x the benefit of a fully diversified portfolio ($SPY, $QQQ or $IWM) in terms of risk-return.
We ran the model for 8 hours and 15 minutes last night, and the results are clear ... find more stocks to smooth out daily price volatility. There are only 2 stocks that are individually better than the diversified market (this used to be ~25 when returns were higher). Indices score very well for long portfolios, unless you want to build your own 8 stock, or (3,42) stock portfolio. For those sizes, what we mean is that the model found 3, 4, 8, 8, 9, 10, 11, 12.....all the way to 42 stocks with roughly the same CQNS score). That score was 6x better than a fully diversified portfolio.
Yesterday was a crazy day in the markets. We had a reversal at about noon ET and markets turned higher. What that meant for Chicago Quantum readers and clients is that if you would have bought our 8-stock portfolio (or the larger 10-stock model) in the morning as the market fell, you would have done exceptionally well if you sold it at day's end. Return, less trading costs, would have been 6x higher than the SPY. This is the logic of the model, when the stock market goes up, these do even better. However, they do fall when the market falls.
We have not looked at futures this morning. Good luck out there.
The end of the day. US Equity markets were down with a small late-morning head-fake to make us think it was a repeat of Monday, but it never happened.
Our CQNS UP Run stocks were down (all but one) on low to moderate volume. We will run the model very deeply again tonight (we tuned the solvers again). We do not have any liquid investable capital today, so we cannot test these stocks. However, we keep watching the markets. They work when the markets go up.
In defense of the picks, almost every sector we follow (with a buy list), was down today.
Leptokurtic and low variance
Current Efficient Portfolio (this one below)
Chips and Semiconductors
Specialty Retail & Furniture (Flexsteel was up, and we like that stock alot)
Crypto & Metals / Mining
We also have a long list of stonks (we call them shitcos - sorry), that are weak but potentially fast flyers when they turn around. in general, most stocks today were down.
Our own personal portfolio is down 16% since we started looking at it again (about a month ago). It is down 3.45% today. This is not personally satisfying...but at least these stocks are a better value than they were a month ago.
By Jeffrey Cohen, Investment Advisor Representative, April 25, 2022
This morning the entire global financial market seemed to be flashing RED (meaning down). I tweeted this morning about a host of financial assets being down, including commodities, global equities and fixed income. The VIX, US Dollar and US Treasury yields were all up (bearish signs for equities). Almost every stock we track across sectors was lower this morning, including money managers, specialty retail, minerals and mining (including crypto), semiconductors, high-BETA and low variance stocks, the diversified indices, the stocks we think of as shitcos (high risk and speculative names), and others were all down, hard. Broad declines, and steep declines.
The CQNS model forward looking returns hit the floor limit of 4%. This is because the S&P 500 Index ETF $SPY earned only 5% last year, while both the NASDAQ Composite $QQQ and Russell 2000 $IWM were down.
Decided to work on our model today and take a long bike ride. First day exercising after COVID 19, and felt good to ride 12 miles, although it took ~90 minutes, and came back around 3:30pm ET to watch the close.
To my surprise the markets were up, and key 'institutional investor' sectors were up strongly.
Money Managers - up
IT Services - up
Shitcos - mixed
Cannabis - mixed
Minerals and Mining - down (but recovered ~ half)
Crypto - up
Personal Computers - mostly up
Leptokurtic and low variance (down - people avoided these fairly riskless havens of income)
Efficient portfolio (CQNS UP Run & individual efficient names) - UP strongly
Chips and Semiconductors - UP significantly
Specialty retail & high-end Furniture- up
Discount retail - down
Trucking - up
This is a reversal of the recession fears of this morning. It happened at Noon ET today across the DOW, NASDAQ and S&P 500.
Why the change?
I think that the market had fallen enough to make the risk-reward trade-off attractive for institutional money. The high BETA stocks that will rise with the market (much faster and straighter), were bid up because at some point the S&P 500 will reverse. The specialty retailers pay healthy dividends and have strong earnings. Maybe next year will be down, but the return implied at current prices makes the trade more worthwhile.
There also could have been short-covering and options bets being made as we have a full month until May expiration. As an example, I saw one of my personal holdings (a stock under $1.00), have 100,000 shares worth of calls purchased for $5,000, or $0.05/share, near market open. A nominal bet that could pay off well if this stock turns around. At the same time, the MEMErs called out to short this stock today, so we saw relentless pressure (at first with low volume), then a partial recovery at day's end. Even I thought of burning the shorts by buying their short shares this morning, but I already have enough exposure to this stock. I also thought of putting some money to work in those cheap, OTM options, since they were suddenly liquid. Institutional investors might have taken the other side of the short/RED stock sales this morning, which could explain the mid-day reversal.
Our CQNS UP run stocks look to have returned about 5x the $SPY return today, so the 'smart money' in the market that wants exposure on the long / upside knew where to place their bets. This tells us that it was institutional investors or well informed accredited investors.
Let's see what tomorrow brings. Thank you for reading our BLOG.
For more information and to read our brochure* please visit our website at www.chicagoquantum.com. *(available at no charge and without logging in, from our homepage)
PART 2 (UPDATED 17:44pm ET):
Bitcoin (currently trading at 40,112 to 40,165) had a green day. This was another asset that was down sharply this morning and recovered.
Speculative shape of the week. We see this, to varying degrees, across many speculative names at market close today. 5-day chart. $RKT is an example. Recession & rising interest rates destroy the fundamentals of their business (mortgage initiation). Friday and into Monday the story was pessimistic, including China's Beijing COVID 19 lockdown, but Monday afternoon this name fully recovered.
It still makes us think about what macro force brought all these names back this afternoon (e.g., short-covering, long exposure into May).
VALE and FCX and CLF are all solid. Business performance is strong. Financials are conservative and firm. CLF is up 50% on Q1 performance. VALE and FCX are down during the same time period.
However, the prices are falling despite strong underlying metals pricing.
This is either a bet against a strengthening economy, or just profit taking. Not sure.
April 24, 2022: After a deep dive into specialty retail...the market is betting on consumer recession
Is this why valuations are down and dividend yields are up?
We just did a quick analysis of 10+ specialty retailers in the apparel and general merchandise space, including sporting good and footware. Dividends are up, prices are down, and valuations are improving across the board. The only thing that makes sense to us is that the market expects revenues, profits and future cash flows to fall.
This is not limited to specific sectors in specialty retail, but across the board.
This, combined with increasing valuations for the discount retail sector (think Walmart), shows the expected shift away from fashion and accessories to basic necessities.
The top 6 and 10 stock portfolio fell along with the indices. Over time, these stocks should outperform the $SPY. The six stocks below the SPY entry make up the optimal portfolio.
All 10 stocks, excluding SPY, make up the 6th best portfolio (out of over a quintillion possibilities). This snapshot was taken 12 minutes before market close, and assumes you would have bought all stocks at the market open price.
These are the stocks to hold when the market rises, but are not as helpful when the overall market falls.
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