Daily Market News - 11th Nov 2021

Technology - Is It Only Just Getting Started?

In the big game us Technical folks like to play of “what have you done for me lately”, I’ve made a lot of bullish calls recently, most of them have worked out well. It’s a bull market after all, so the game I play hasn’t been too difficult of late.

If you can keep on top of the rotations, and identify relative out performance, my job is done and it’s usually done pretty well. I’ve been at this game long enough to know the good times don’t last forever, but lets all enjoy it while the momentum moves are here.

In today’s letter, lets talk about Tech.

Yes, THAT tech.

The same tech that’s been ripping higher since 2009.

But let me get to a few charts to show you why I’m being super selective in Technology right now and why I’m avoiding some areas of Technology like the plague.

XLK Relative to S&P500 Chart

As we can see from the chart, Technology (while recently it’s been on a tear)… over the last 5 months, it’s actually been largely choppy. I know recency bias is a thing and many tend to forget the past, but there have been better places to be allocated.

Tech is breaking out relative to the S&P500, so if you’re a money manager or a hedge fund and your clients are looking for out performance, this is where you’re gonna be looking. It’s why ratio charts help me a lot.

If I know where the out performance is, then I know where the capital is likely to go.

But lets talk about the elephant in the room just now. The payment processing technology companies.

Man, these things have been beaten to death these last few months.

If you don’t know what Jack Mallers over at Strike is doing, in short, he’s disrupting the whole sector with a level of style I can’t help but admire. He truly is the kind of CEO I could sit and have a beer with.

He basically has a product that means you can transfer funds from A to B from anywhere in the world, virtually for free using the Bitcoin Lightning Network.

I know, Bitcoin isn’t just a digital asset. I didn’t know that until 3 months ago. True Story.

IPAY ETF and Paypal (PYPL)

These charts don’t scream strength to me,.

I know many of you reading will be thinking about things like valuations, but for me, the market is telling me to stay away from these names and focus on the names that are going up.

When I was a kid, mom taught me early on to never catch a falling knife, and as I approach 40yrs old, the learnings are still as relevant to me today.

Sure, they could turn around and melt higher, but that’s ok, there are plenty of areas going up, so I’ll leave it to the value guys to dissect and potentially bag hold a few months/years.

So what areas ARE moving I hear you ask?

Semiconductors (SMH) Relative to S&P500 (SPY)

The names that myself and most of my members have been in recently are names many of you will know well.

AMD, NVDA, these have been absolute rock stars and generated the kind of returns over the last month that surpassed all expectations. As most of you watching know, I don’t use the magical hindsight indicator.

AMD (Premium Chart from 7th Oct)

The stock price hit a high of $155 a few days ago with an RSI level through the roof.

In short, I’m looking for opportunity in semiconductors after a digestions of gains (I personally sold my AMD position this week, and I’m still hold my long term NVDA position).

I’m currently avoiding payment processing companies.

Could that change by next week if charts set up again? Sure.

But there are plenty areas moving. So I’m ok if I miss out.

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