Exponential Trends

Breakout in semiconductors just beginning

2019-09-23T12:00:00.001-04:00

Arguably semiconductors are one of the most cyclical subsectors. If we are indeed observing a new shift in to cyclical offensive sectors, semiconductors should lead the way. And they seem to be doing just that after going nowhere for 19 years. It looks like we're in the early stages of leaving this 2 decade base and moving toward the 1.618 Fibonacci extension where I expect some consolidation will occur.

This is a very volatile technology subsector and is often difficult to hold. My favourite ETFs in this space are SMH and XSD.

Nasdaq 10000 by the end of 2020? 2.618 Fibonacci extension target is ~13000

2019-09-23T11:48:00.000-04:00

It has been a while folks. Anyway here goes:

I think the Nasdaq is going to leave the 1.618 extension of its 2000 high behind and head to the next extension level (2.618). Rounding the 2000 high to 5000 and the 1.618 extension to ~8100 (which we have been trading around since Feb 2018) the 2.618 extension would bring us to approximately 13000.

It took the Nasdaq 18 years to reach the 1.618 extension level.

The 2000 - 2015 Nasdaq base is gigantic. It's possible that the breakout has just begun.

Where have all of the AAII bulls gone? Europe and emerging markets apparently...

2017-05-21T14:43:00.000-04:00

Despite the S&P500 being only 24 points from all time highs, AAII investor bullish sentiment has reached unusually low levels. Fund flow data indicates that over the past 2 weeks a lot of money has left US equity ETFs and flowed into developed international and emerging market ETFs. The Fast Pitch blog indicated recently that fund manager US equity allocation is currently at a 9 year low.

From a contrarian perspective one must view this as positive. With cash balances of the top companies in the S&P500 at record levels, corporate tax reform on the horizon combined with sound corporate and economic fundamentals, it makes sense to be a buyer of US equities. I think the majority of investors are being distracted by the negative media and the recent Trump political drama.

Nasdaq 2017 = Dow Jones Industrial Average 1950s? Ultra bull market ahead?

2017-05-21T14:18:00.000-04:00

Looking back it wasn't surprising that the US stock market would enter a correction at the Nasdaq 5000 range. This was the previous year 2000 top (~5200). Breaking through this level required more conviction on behalf of the market as it signified the Nasdaq was finally leaving the dot.com bubble top behind it. Market watchers have been focusing on Dow 20000 and S&P500 2400 but I think the Nasdaq is the index to watch.

After the 1929 top, the Dow finally reached new ATHs in the early 1950s AFTER which a 18 year bull market followed until concluding in 1968. The post 2000 Nasdaq has a very similar chart to the post 1929 Dow. Some differences being that consolidation in the Nasdaq post 2000 was more constructive and shorter in duration than Dow consolidation during the Great Depression. From absolute top to bottom the Nasdaq corrected less than the Dow and reached new ATHs sooner. One can suggest that the modern Nasdaq has shown more resilience than the 1930s Dow. If the Nasdaq follows a similar pattern of Dow 1950 we can expect a long and powerful bull market ahead.

Option Buyer Sentiment Gauge remains at 2009 levels

2016-04-12T13:05:00.000-04:00

Option buyer sentiment is at 2009 levels. Is it too optimistic to expect a rally as significant?

Too late to turn bullish on oil?

2016-04-12T12:21:00.001-04:00

Although the media has "turned bullish" on oil, I wonder if this sentiment is a sign of a short term top. I think the OPEC news is largely irrelevant. We are awash in oil. From a technical perspective, both WTI & Brent are approaching short term overhead resistance.

What are the stock charts of Canadian banks saying?

2016-04-12T08:31:00.000-04:00

I must admit that I'm worried about the Canadian banks. Not withstanding all of the risks surrounding the Canadian housing bubble, they're overvalued when compared to their US and especially European counterparts by at least 50%. P/E and P/B ratios suggest this nearly across the board. The risks associated with the Canadian real estate market is the single reason why I have no Canadian assets other than my primary residence. The charts of the Canadian banks are difficult to interpret. RY & TD are of course the strongest and have held up best over the past 2 years. But this could be a "flight to supposed safety" as Canadian investors move further into the "safer" banks. The downtrend the bank charts show doesn't look as severe as the early downtrend prior to the financial crisis but they do illustrate concern among investors. They continue to post lower lows at a slow grinding pace - 2 years and counting. Unfortunately, when it comes to downtrends, the most pain is usually felt at the end. I'm sitting this one out.

Bearish sentiment is reaching extremes in some areas of the market. Is it time to be contrarian?

2016-04-11T18:21:00.004-04:00

Sentiment on StockTwits is often telling. Currently traders are bullish on defensive sectors such as utilities, consumer staples and healthcare. Traders are very bearish on the broad S&P 500, Nasdaq and especially small caps. This is after a huge rally of the Feb lows. I think it's best to be contrarian at this juncture.

Where does the Canadian dollar go from here?

2016-04-11T09:29:00.002-04:00

The $CAD has been rallying hard off the bottom after collapsing to 68 cents US in late Jan. As the long term chart shows, the $CAD has crashed faster and fallen further than almost anyone would have predicted. After such a crash, dead cat bounces and the development of subsequent trading ranges are almost inevitable (it's not going to zero nor it is it going to rebound significantly anytime soon). Fundamentals do not support a strong Canadian dollar nor a strong oil price on which it is heavily dependent. If history is any guide, both oil and the $CAD will remain depressed for a long time. Technically speaking, the $CAD is hitting solid overhead resistance around 78 cents. I suspect an intermediate term trading range develops between 72 and 78 cents for the next several months.

Print Your Own Medicine?

2016-04-11T09:10:00.001-04:00

I thought this was very interesting. 3D printing is evolving exponentially and is destined to disrupt the pharmaceutical supply chain.

Will small caps outperform through 2016?

2016-04-11T09:05:00.000-04:00

The Russell 2000 has lagged the S&P 500 since early 2014 - approximately 2 years. Similarly in 2011, small caps turned down first prior to the Euro Debt Crisis induced mini bear market. The 5 year chart shows that small caps have lagged the S&P 500 significantly. These trends don't last forever. Small caps are usually the first out of the gate during a market uptrend and the first into the tank during a market downtrend. If one were to assume that the bad news is now behind us and the market will begin to price in future growth, small caps should lead at least for short term and intermediate term. Since the market bottomed in Feb, small caps have been leading the S&P 500 by a 2:1 ratio - significant early outperformance.

Will The Robo-Advisors Take Your Job? (Diamandis, Edelman) - Exponential...

2014-11-15T14:22:00.001-05:00

The Global Evolution of Networks and Computing Systems (Brad Templeton) ...

2014-11-15T14:12:00.001-05:00

Internet Stocks To Lead NASDAQ To New Highs In 2015

2014-11-14T13:40:00.001-05:00

The internet stocks are showing relative price strength after a year of price consolidation and will likely lead the NASDAQ to new highs in 2015. The largest companies by market cap in the Dow Jones Internet Composite index are listed above. Notice that Facebook (FB) and Google (GOOGL & GOOG) make up approximately 20% of the index alone. Google has been moving sideways for the majority of 2014 and I think is modestly valued relative to other technology companies. FDN is the largest ETF that tracks this index.

Russell 2000 Turns Positive For The Year. Small Cap Stocks To Lead As Risk On Trend Resumes.

2014-11-10T22:19:00.001-05:00

The Russell 2000 has rallied hard from the October lows after being down >10% for the year. If history serves as an appropriate guide, small caps will lead the S&P 500 to the end of the year and beyond. IWM is the largest ETF that tracks the Russell 2000. VB, VXF and IJR are likely better ETF choices to track small US stock indices.

Microsoft Is Taking Off Like It Did In The Early 90s

2014-11-10T21:50:00.002-05:00

Microsoft (MSFT) recently passed $400B in market cap. Just by looking at the above chart, it appears to be in a long term uptrend similar to that of the early 1990s.

Canadian Banks No Longer Leading US Banks. Trouble Ahead For The Canadian Economy?

2014-11-04T08:42:00.001-05:00

The Canadian banks (XFN) have outperformed their US counterparts (XLF) since 2009. They have been placed on a global pedestal due to their reluctance to participate in the subprime mortgage debt and collateralized debt obligations that precipitated the Great Recession. Their balance sheets remained extremely healthy and their stock prices reflected this to this day. But that was then...

Two of the 4 wheels have blown on the car that is the Canadian economy. Precious metals and material stocks are down some 70% since 2011. Now stocks of energy producing companies are free falling in tandem with the price of oil which seems to be in global abundance despite the fact that the opposite view held the public consensus only 6 years ago. Don't get me started on the Canadian housing market.

Banks and financial sectors reflect the overall health of a country's economy. Their relative performance is predictive of the relative performance of a given country's economy. The chart above would suggest that growth in the US economy will continue to outpace that of the Canadian economy. If the Canadian bank index is unable to post new 52-week highs and/or trends lower trouble is ahead.

Digital/Synthetic Biology (Raymond McCauley) - Exponential Finance 2014

2014-11-02T16:48:00.001-05:00

Exponential Thinking (Peter Diamandis) - Exponential Finance 2014

2014-11-02T16:45:00.001-05:00

Vanguard Canada Must Own ETFs for Canadian Investors. VUN and VFV.

2014-11-02T10:52:00.000-05:00

Vanguard Canada provide the best and cheapest ETFs available to Canadian investors. Two must have ETFs for Canadian investors are the US Total Stock Market ETF (VUN) and the S&P 500 ETF (VFV). Both are NOT hedged and provide broad exposure to the US stock market and the US dollar. They are the cheapest ETFs of their kind and have extremely low management expense ratios (MER). The MER for VUN is 0.15% while the MER for VFV is a category low of 0.08%.

Biotechnology & Health Care Stocks & ETFs Continue To Lead The Stock Market Higher

2014-11-02T10:42:00.000-05:00

Biotechnology and health care stocks and ETFs continue to lead the market. This is becoming a dominant theme within the broad technology sector. It is likely that health care and biotechnology stocks continue to grow in relative market cap weight in the major US indices (i.e. NASDAQ 100 & S&P 500).

Year End Mid Term Election Year Rally Underway. Small & Mid Cap Stocks Leading.

2014-10-31T16:49:00.000-04:00

The strong mid-term election year end rally is underway. Small-cap (IWM) and mid-cap (MDY) ETFs have taken the lead.

Biotechnology ETFs post new 52 week highs

2014-10-24T12:38:00.000-04:00

Public Investor Sentiment is Extremely Negative

2014-10-19T15:11:00.003-04:00

Public market sentiment is extremely negative. Fear is currently running higher than it did during the Euro Debt Crisis of 2011. The difference then was that fear didn't reach similar levels in 2011 until all of the problems with the euro zone became apparent and the S&P 500 had corrected approximately 15-20%. Fear is higher today with less downside movement in equities. What's interesting is how negative public sentiment is when compared to investor sentiment. Investor Intelligence reports somewhat bearish or neutral sentiment while public sentiment has become extremely negative, extremely fast. This is generally good for the stock market.

(charts courtesy CNN Fear & Greed, Stockcharts.com)

How much is oil worth?

2014-10-19T14:54:00.002-04:00

How much is oil worth? In my opinion, much less that its current price. As illustrated above, the price of oil does not have a definitive long term price trend. Analysts will often use supply and demand data in order to forecast the price of oil as they do with gold and other commodities. They do not, however, take into consideration how technological evolution not only affects oil exploration, but oil usage. Is it reasonable to assume that the world will consume more oil in the future than it does today? I think the price of oil is based on approximately 75% public psychology and 25% current fundamentals. It is short sighted to suggest that over time, a better technology won't replace oil as a primary source of energy (ie. solar). Oil, other commodities, bonds and real estate tend to go up in price when global stocks are not (i.e. during a secular bear market). We're now in a secular bull market for global equities that probably began in 2012. Expect most commodities (including oil) to fall in price. Based its historical price, a barrel of oil is probably worth around $30.