The Seven Day Scope: Free Weekly Report (Snipers Only) "Be Water My Friend"
Small Caps, Micro Caps, Breadth, Bitcoin, Finding Outliers...
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"Be water, my friend" is a famous quote from Bruce Lee, encouraging flexibility and adaptability. He believed that just like water, we should be able to adapt to any situation. Water takes the shape of any container it’s in, whether it's a cup, a bottle, or a teapot. It can be gentle and flowing, or powerful enough to break through rock. By being like water, we can be more resilient and better handle life’s challenges by adapting our approach as needed.
Bruce Lee's philosophy suggests that rigidity and stubbornness make us more likely to break under pressure, while being adaptable helps us overcome obstacles. If we are like water, we can navigate through difficulties smoothly, adjusting to changes without losing our essence. This approach promotes a mindset of openness and continuous learning, allowing us to grow and succeed in various circumstances
Now, we need to become water.
Open to anything. This is the key to becoming a good macro trader. Sometimes, I think people think that I am crazy, flaky or plain stupid because I change my mind. The thought that has always stuck with me is.
“When the facts change, I change my mind - what do you do, sir?”
―John Maynard Keynes
Not my favorite economist but this quote always stuck with me. We have to be open to change our mind when the facts change. If I am model based, I can have opinions like anyone else does but sometimes my models will tell me that I am being an idiot. This is why I build models lol.
What has changed?
This is a chart from Grant Hawkridge. I am a fan of his data driven work. If you are a bull this is what you want to see.
We have been long the Russell all year long but it has not gone anywhere, until now.
We kept posting about the band squeeze break out, here it is.
Microcaps also have a similar look.
Will we see this ratio reverse here?
The world stock market continues to make new highs as well as the global advance decline line.
Our bull/bear indicator never gave us a sell signal. However breadth was thin and the ride was choppy. Now we have the ingredients for a stable rally in the summer? At the very least we should see followthrough for the next month or so.
Yesterday we saw the most new highs since 2021. This led to a 7 month rally.
Does this mean that I will get rid of our semiconductors or nasdaq positions… No way. Look at the trend. Ride the trend until the end when it bends… absolutely.
This brings me to a thought.
What conditions bring on new trends.
Sentiment-The sector has to be hated. People have to think things like “that will never move again”
.
Think of commodities like oil in 2019-2020.
Positioning-You want to see everyone on one side of the boat. Commercials buying and large traders and retails selling.
Small cap positioning is is incredibly lopsided.
Volatility-You can see that a market is dead when volatility starts contracting and you see new lows in band width.
Breakout-Finally a grade A breakout. A grade A breakout is when you have a band squeeze and a breakout at the same time and it clears major resistance all at once.
Relative Strength. I need to see this continue to stay bullish on small caps but this is a good start.
The KRE regional banks has a similar look. Everything is screaming that the Fed Rate is going to drop soon. We added it to our long term portfolio yesterday. Still actionable.
Keep your eye on Bitcoin. If we see bitcoin start to move higher, I think all of the ingredients for a major rally is here. Across most asset classes.
Warm regards, Jason Perz
YouTube: @againstalloddsresearch https://www.youtube.com/channel/UCLvDNCnhNQbQnABUSFbwagg
Twitter: @jasonp138
Substack: aaoresearch.substack.com
Against All Odds Research
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