Minerva Market View for Nov 10, 2023
Has the recent rally run its course? How should we hedge for the downside?
Good evening! As regular readers know, we were expecting a bit of a correction in the major indices to digest the rapid gains from earlier.
Positioning and Market View
However, today’s correction was a bit more severe than we expected. This was triggered by an especially weak auction of 30-year bonds, which led to a spike in yields and a fall in long-term bond prices as seen in ETFs like TLT 0.00%↑ and LTPZ 0.00%↑.
The higher-beta / lower-quality indices such as the Russell 2000 showed signs of reversing.
Markersmith also reported its first distribution day of this rally i.e. a day in which the major indices close meaningfully below the prior session on higher volume. While this is by itself does not mean we have to sell everything, it is a sign to be cautious as too many distribution days can invalidate the rally.
Market breadth also noticeably weakened as shown on the Stockbee Market Monitor with down stocks about 4 times that of up stocks:
Portfolio and Performance
We had tightened our stops on many of our positions and exited our long-term bonds LTPZ 0.00%↑ and the small/mid-caps VB 0.00%↑ today. We also booked gains on stocks such as MPWR 0.00%↑.
As covered previously, we had been adding shorts and today we added a lot more and were able to deliver a net gain in our alpha (long/short) book. Positions in yellow below are today’s additions.
Shorts such as GH 0.00%↑ GM 0.00%↑ JWN 0.00%↑ etc. as well as some longs such as CCJ 0.00%↑ worked well for us today:
Of course, we had our fair share of losers as well, but were able to limit the losses on the alpha book. The beta book took a beating along with the market. After exiting LTPZ 0.00%↑ and VB 0.00%↑ and adding the shorts, our overall net long exposure is now at 44%. We are staying flexible and will move with the market.
Watchlist
Here’s what we’re watching for tomorrow:
Long: AKAM 0.00%↑
Short: TXG 0.00%↑ IRTC 0.00%↑ NEP 0.00%↑ PEAK 0.00%↑ AA 0.00%↑ RCM 0.00%↑ THC 0.00%↑ NYCB 0.00%↑ PRGO 0.00%↑ DOC 0.00%↑ HOG 0.00%↑ CGNX 0.00%↑ WBA 0.00%↑ SHAK 0.00%↑ KEYS 0.00%↑ HGV 0.00%↑ DAN 0.00%↑ IRT 0.00%↑ FCX 0.00%↑ CNHI 0.00%↑ COLD 0.00%↑ DAR 0.00%↑ OI 0.00%↑ WOLF 0.00%↑ CHWY 0.00%↑ NCLH 0.00%↑ SONO 0.00%↑ M 0.00%↑ CWH 0.00%↑ ETSY 0.00%↑ KMX 0.00%↑ MP 0.00%↑ AAL 0.00%↑ INMD 0.00%↑ GPRE 0.00%↑
We’ve also tightened the stops on our positions to make sure we lock in our gains in case the market does take a deeper dive.
Worth checking out
Some great interviews out today:
That’s all for now! If you like our work, please share it with your network. We believe in sharing actionable trade ideas in liquid US-listed stocks/ETFs that all investors, big or small, can execute. Your friends will thank you for the added alpha 😊
Happy Trading!