Market On Close, Wednesday 16 October
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Absolutely Professional And Rule-Bound At All Times
by Alex King, CEO, Cestrian Capital Research, Inc
When I was young I believed everything I learned in market textbooks and professional investor courses and things like that. About how earnings drove markets and how markets were rational etc.
25 years into my professional investing career I am fully committed to the red-pill, Matrix-free version of market reality, which is to say that the whole thing is essentially a giant videogame which occasionally has an input from reality that it is forced to deal with.
Once you get over the shock - what, it’s not about earnings or GDP??! - then this all becomes rather restful.
It means you don’t have to worry so much about this macro number or that earnings estimate. It means you just have to learn the rules of the videogame, which is to say learn how to read a stock chart (the stock chart is like a map of the virtual world). And you have to know when a disturbance in the Matrix, a bug in the runtime, can shake up the rules for a short time.
In our research we use plenty of fundamental analysis; we’d pit it against that from any tier-1 Wall Street institution. But we treat fundamentals as something interesting rather than determinative of securities pricing.
The charts we post here each day are what I use to invest and trade my own capital. (Note, Inner Circle subscribers receive disclosure alerts of all my trades in covered stocks and ETFs, ahead of time).
The bug in the runtime this week, the big joke amongst bigs, was the $ASML debacle yesterday, when a $200bn++ market cap business apparently pushed “publish” on its Q3 numbers a day early. Bad numbers, that said, or at least the reaction was bad. Off sold semiconductor and dragged the Nasdaq down with it.
Today it seems that silicon is no longer a has-been but instead a thing everyone can get behind once more. If $SOXX rises on the Taiwan Semiconductor print tomorrow it would be easy to conclude that ... nothing is real and $ASML was in fact just a hilarious jolly jape after all. The sector was flat today at the close, having been up a little and down a little all day. The SOXX chart still looks pretty good to me, but then I am long $SOXL so I most certainly do have a dog in the fight.
Righto, we have to get to work.
Actually before we get to work … read this.
A Real AI Use Case
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SignalFlow AI sounds complicated, and the underlying model is complicated, but the output is simple. The service - at the low launch price - is focused very simply on the S&P500. The outputs are, risk on, and risk off. Risk on = buy or hold the S&P500 (the model uses $SPY but other ETFs would work too); risk off = sell the S&P500. You can use this to move capital into and out of $SPY, and/or you can use it to help you assess the overall risk environment as regards other stocks and ETFs you may hold.
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Short- And Medium-Term Market Analysis
If you want the past-the-paywall content of this daily note - we walk through the S&P500, the Nasdaq, the Dow, the Russell 2000, bonds, oil, volatility, tech and semiconductor, just click here. 7 day free trial available.