Minerva Market View for Nov 9, 2023

Similar market action as yesterday. Our alpha (long/short) and beta books are working well.

Good evening! Markets continue to behave in a broadly similar manner this week, with some minor ups and downs and closing close to the prior day’s close.

Positioning and Market View

In our opinion, the large-cap indices (S&P / Nasdaq) will continue to do this and may even correct a bit here to digest all the gains from last week.

Once this period of digestion is over, we are looking for the indices to resume their upward moves. Now is a good time to get in on the indices with a daily ETF allocation to VOO 0.00%↑ or VGT 0.00%↑ (the small caps are not behaving that well).

The indices have been on a strong 8-day winning streak. Here’s what has happened in the past after such long winning streaks on the S&P 500:

And here’s what has happened after Nasdaq winning streaks:

Since 1976, when the Nasdaq Composite registers SEVEN consecutive daily gains and records a SEVEN-day Rate of Change (ROC) surpassing SEVEN percent (7%), it signals a favorable outlook for equity investors. This unusual phenomenon results in a skewed positive distribution of returns for the Nasdaq Composite, the SPX and the Russell 2000. Continuing the theme of SEVEN, the historical returns for Semiconductors show six-month average gains of approximately +25% characterized by skewed distribution of SEVEN UP/ zero down. Courtesy: Nautilus Research.

Of course, past returns do not guarantee future performance in this business, but several such indicators lining up at once give more support to this rally.

At the same time, the weaker stocks have started correcting, offering good short opportunities to hedge our long positions.

Portfolio and Performance

We’ve been about 70% net-long and are delivering steady gains in line with the SPY 0.00%↑. Large caps and long-term bonds continue to outperform and our beta exposure to those through VOO 0.00%↑ VGT 0.00%↑ and LTPZ 0.00%↑ has been very helpful.

Our shorts are also working well for us. Today, we shorted AHCO 0.00%↑ GH 0.00%↑ GM 0.00%↑ SJM 0.00%↑ and DXCM 0.00%↑ to add to our previous shorts. AHCO 0.00%↑ fell a massive -15% today! MASI 0.00%↑ shot up during the day, and we might close it out tomorrow.

For beta exposure, we prefer VGT 0.00%↑ based on its strong relative performance.

Watchlist

Here’s what we’re watching for tomorrow:

Long: CRH 0.00%↑ LLY 0.00%↑ ATS 0.00%↑ PINS 0.00%↑

Short: TXG 0.00%↑ IRTC 0.00%↑ SHLS 0.00%↑ MODG 0.00%↑ FSLR 0.00%↑ TDOC 0.00%↑ CSIQ 0.00%↑ MP 0.00%↑ ILMN 0.00%↑ WBA 0.00%↑ DEA 0.00%↑ DAR 0.00%↑ HGV 0.00%↑ NYCB 0.00%↑ F 0.00%↑ TKO 0.00%↑ DRVN 0.00%↑ CUZ 0.00%↑ BAX 0.00%↑ KMX 0.00%↑ JWN 0.00%↑ COLD 0.00%↑ SONO 0.00%↑ CNHI 0.00%↑ NVST 0.00%↑ FND 0.00%↑ HR 0.00%↑ ARKG 0.00%↑

Worth checking out

Recession worries are here, but the economy is not falling off a cliff: Ryan Detrick

---

“The fall of WeWork shows the deepening cracks in real estate” - The Economist

---

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!

---

Disclaimer: This post is for professional investors only and is shared with other like-minded investors for the exchange of views and informational purposes only. Please see the disclosures and disclaimers for more details and always note, we may be entirely wrong and/or may change our mind at any time. This is NOT investment advice, please do your own due diligence.

Nothing in this newsletter is an offer to sell or to buy any security. The author is not responsible for any financial loss you may incur by acting on any information provided in this newsletter. Before making any investment decisions, talk to a financial advisor.

---