Friday 📸: Favorite Trade, Market Bias, Porfolio Positioning & Performance
Other Oils
Good morning - I’m adding a brief reflection to this Friday letter - noted in the ‘portfolio n and performance section’. I’ll note the strongest portfolio performers week to week. I have my favorite trades of course up top - but sometimes those are more forward looking.
Favorite Trade
I’ve talked about Soybean Oil (ZL), but I’ve added Canola Oil (RS) to the swing portfolio as of last Sunday this week. (Now, these trades will be posted same-day via the subscriber chat and email). That Canola Oil trade broke above the 52-wk high last Sunday and was immediately smacked down - so I’ve been sitting on a small loss for the past few days. That’s how it goes.
An odd choice for a ‘favorite trade’ then? Well, no. The signal is the signal, and capital is flowing away from more speculative risk assets and into hard assets (I mean, hard assets carry risk too).
The price of oil is causing many commodities to re-price - here you can see WTI Crude Oil leading and pulling Soybean Oil and Canola Oil up with it. But you could throw Wheat, Corn, Soybeans, Palm Oil on there and you’d see a similar dynamic.
But this rising-tide-lifts-all-boats dynamic for commodities relates to shipping and liquified natural gas as well.
This trade is still actionable - we went long the natural gas producer etf ‘FCG’ yesterday - on this ALMOST new all-time-high:
FCG was added to the long term accounts - expected trade timeframe of 1-2 years.
Market Bias
The broad US stock indices have been weak, but I wouldn’t touch a short of the broad market of stocks with an anything-foot pole.
The deeply infused myopic focus on tech stocks and the S&P is both fascinating and dumbfounding to me.
The broad NYSE composite index of stocks doesn’t look like a buy or a sell. Looks like a meh:
And while the Chicago Fed’s National Financial Conditions Index is showing that liquidity is tightening, conditions are still relatively loose on a historical basis. This is a confusing chart - but just know that if the blobby colored chunky lines are moving up, financial conditions are tightening:
But the Fed is not seeing any meaningful financial stress at all right now - even with how bad private credit looks. Granting the fact that liquidity can be fine right up until the moment when it isn’t.
St. Louis Fed Financial Stress Index:
The less-than-almighty dollar still can’t really buy a bucket, even with all this geopolitical panic and heavy short interest. This morning though, it is just peaking above this consolidation range. Let’s see if it holds and can move higher. That would change everything.
The Dollar Index DXY:
As long as the dollar remains relatively weak, commodities and emerging markets stand to outperform. Provided U.S. stonks don’t completely roll over and die.
Portfolio Positioning and Performance
Across the portfolios, I’m seeing capital rotation. What’s working best are Aluminum stocks (CENX and AA), Lithium stocks (LIT), Energy (DBC, IXC, XOM, CRAK, OIH, XOP, XLE) and Norwegian stocks.
Emerging markets have slowed overall for the last few weeks. Nothing to do there for now, but let the trailing stops do their work if necessary.
See you this weekend,
-Andy
Swing (6-12 months) Portfolio Year-to-Date Performance: +12.18%
Long Term (1-2 years) Portfolio Year-to-Date Performance: +8.24%
