[Transcript below is automatically generated and not 100% correct]
welcome to stock odds this is dave singh and rob friesen with odds and ends another podcast for you to help you prepare for the week ahead we just want to get our bearings on what the odds say or good trades for the week and help you get aligned with that as well how are you doing today rob good i think we do it for each other uh more more so than the rest of the community they can listen if they want but but we got to discuss this stuff because uh we got to hit the ground running on monday and some of that follows uh through all week as well so uh it's good to get our head around some of these uh themes and um you know decide which uh which groups are favored and we we have we have the ability to be completely diversified right like we can take you know one or two stocks you know from every industry if we wanted to we can um you know in addition to that you know we're running at being market neutral anyway things like that so we can kind of take on as much macro exposure as we want you know hopefully in our favor we can reduce that tremendously we can take industry exposure or reduce it so you know it's it's really amazing all the different you know components to this business and how much you can do and how it can be so different from another person it's just amazing to me all the different ways that people make money and uh and yet at the end of the day there seems to be a few ways that people consistently lose money so the the commonality of losing is more similar but the uh the methods and and models and and strategies that people use to make money is quite diverse yeah so um anyway we're we're hitting uh earnings season here um and we've got the major banks uh coming out this week uh so this is really interesting um overall uh the aggregate earnings increase for um the s p 500 symbols is supposed to be about 27.6 according to factset uh if i got that right um so that means that we are expecting earnings to be pretty robust uh but you know what's included that wouldn't have been forecast before would have probably been the bottlenecks the supply chain disruptions you know the fact that yeah you could have sold a lot more cars if you would have had chips or yeah you could have sold a lot more of this or that or i mean it's so industry you know broad there's so many technology components throughout many industry groups that uh it's going to be interesting to see what what happens here with this earnings season because you know everyone's expecting there to be that bigger bump uh but you know we've had these disruptions and i mean when you look at the amount of ships that are still sitting you know at the at the ports uh trying to get unloaded there's not enough trucks all the way through the supply chain right you know to the final marketplaces uh there's you know lack of employees there's there's lack of service vehicles i mean it just goes on and on and on so it's it's going to be interesting um i heard that goldman decreased the um you know growth expectations from so they went from 5.7 for this year to 5.6 gdp and then for next year 4.4 they decreased it to 4 percent um so that's just citing things like you know some of these bottlenecks um you know the delta various did kick us back a bit you know from what was expected because that was that wasn't planned for either so um anyway uh over to you no i was just looking at the futures for the week as well and trying to get my bearings there i mean we've got the tenure up again oil up again that we're over 80 dollars a barrel well the the the bonds are selling off but the in interest rate is rising right so uh the 10-year interest rate would well that if you're watching something like tlt that's really referring to the 20-year right so um but if we look at the the two-year five-year 10-year and 30-year um there's a there's a lot of kind of air pocket coming up here like if if there's kind of one one support level that i see these bonds are sitting at the 30 year isn't quite there yet but but but you notice the 10 and the 5 and 2 are on that level if if that if that breaks there's a lot of air under there which means that there's room for for the interest rates to rise as the bonds sell off and this could very well be happening you know here shortly i mean i'm not i'm not i don't look at a lot of stock charts like charts on stocks but when it comes to our predictors our leading indicators things like that we have to look at you know what's actually on trend what's happening and uh you know there's i think that bond traders put a lot more work and effort into everything than equities traders generally speaking right there's a there's a lot more stuff they're aware of you know and uh you know and in fact when we go back to 2020 you know already in january when stuff was starting to come out of wuhan on the on the coronavirus the bonds were already reacting significantly to that whereas the equities didn't really move till you know more into february right and it wasn't until sort of that the end of february that things really you know started rolling down but but the bonds were already factoring things in well ahead of the equities and i and i just i've just seen that they're they're more research orientated in general i think so you see a risk of like a sudden move up in interest rates and that's going to be very negative for the markets well i just i don't know if it's necessarily sudden but just more continued risk to that to that side right i mean truth be told i mean the markets can handle going all the way back to three and a half percent you know it but it's it's because people have been addicted to these low rates and there are some industry pressures right like they're because of the leverage implication and because of the sort of the free money aspect um you know i think i think there's going to be that that's why they call it the taper tantrum right it's like we're going to get upset but but in reality the markets could handle a lot you know what i mean if people would just take a chill pill they could handle a lot so would you use that to press certain sectors more like longer financials and short utilities real estate i mean here's the here's the monkey wrench right you got the banks have earnings which can affect the financial group right but if we're expecting them to be you know okay because they really haven't had the benefit of you know the interest rates going back up is when they tend to usually make more money right so the the in the earnings might not be that good but people will be forward-looking right so you could have a bad earnings report and the banks would still be up i so i think our downside on that's fairly limited so the way the 10-year is pointing the 20-year you know five year in the two-year i think i think we can safely well safely quote-unquote i mean we can we can put our money to work in the financial area still and uh take some risk there so if if i had if i had a choice and i can go into stock odds and you know curating some odds on financials i would i would look more to the long side right so if if there was odds that you know said hey short this stock or short that stock um i don't have to take those because that's going to that's going to insulate me more and and reduce the return on capital because you're long and short in an area where money's flowing you know flowing into that if i'm not sure and we don't have any uh you know information relative to the financials then yeah fine but if the if the 10 if we come in tomorrow morning and the 10-year yield well wait a minute bonds are closed tomorrow because of columbus day right yeah bond markets closed and the stock market's open so so we have a bit of a problem here right so when big you know big brother is not in the room you know the other siblings can can run around and cause trouble right so the futures the s p futures and the dow futures and the russell futures they're not going to have big brother bonds around to uh keep them in line tomorrow that's true so it does change things right so you watch correlations quite a bit correlations of etfs to each other stocks to each other and you've been noticing they're getting closer and closer to a correlation of one right and uh in the past you said that's kind of a risky behavior everything just has a correlation of one and goes down right that's it's not as good as yeah you'll see you'll see more days where like if you were to look at the the map of the market that you can see one on finviz for example you're going to see like you know all the sectors mostly green on a day with there's a few symbols here and there that might be the other way or are you going to see all the symbols read you know it's it's like we're getting back to that kind of a a market where the entire market moves the same direction yeah right so correlations of one um mean that it's not it's not that high i'm just saying they're moving in that direction right so um that more things are are correlated and you know you do see like you could have utilities you know up you could have gold up you could have technology up you could have health care all up like you know normally you get a little bit more of a rotation there right like let's uh you know let's sell technology and buy utilities which are more defensive right but they're but they're all up or they're all down that that just tells you something yeah well i was checking the seasonality almond almanac um we're coming up towards mid-month seasonality on wednesday and thursday that's the 9th and 10th business day of the month and i wanted to see which sectors are expected to either outperform the spider or underperform and i found too uh the russell uh is it's expected to do pretty poorly all month except for mid-month seasonalities it's expected at 1.2 percent relative to spiders 0.8 percent and then also the technology is expected to underperform the spider quite a bit to 0.54 for for the xlk versus 0.81 for the spider so any insights on how to play that um the russell and maybe weakness and tech coming into this week yeah well i mean mid-month seasonality starts on the on wednesday so we've got you know we're kind of coming into october's you know kind of volatility time we've already had a little bit already the start of this uh october but could be more so you got earnings you know you've got um still stuff going on in the government you know it's like a playground there um you've got uh this oil oil problem and and you know we'll get into that a little bit later here but just i i just saw something that was interesting um yeah the the mid seasonality well i wouldn't get too excited right away maybe on monday or tuesday like things are kind of pointing a little bit softer um with you know we have bond bond markets are closed we have canadian markets closed so there's some volume that's going to be off the table if you have any dually listed stocks like some of the banks some of the railroads you know things like that gold just be careful that you know in trading them because the toronto stock exchange is closed where the new york stock exchange is open so it it just tends to change their behavior a little bit the canadian the canadian stocks that are listed on toronto first they're also listed on on new york so if both markets aren't trading only one's trading it just i just find the behavior different so just be aware of that um also if there's less volume on the market in general because of columbus day and because of canadian thanksgiving there's just less less volume you know it could be either way it could be we could have a sell-off that's significant nobody's around to provide liquidity and step in we could have a rally too you know that uh you know just because it's easier to move things when there's light volume so i would um just kind of if you if somebody is isn't yakking about these things you just tend to forget you miss them right so we're just yakking about hey we're coming into earnings season we're yacking about seasonality coming into wednesday mid month seasonality starts we're we're talking about you know thanksgiving we're talking about um columbus day you know the all of these things add levels of complexity to what we do and it can be an opportunity or they can be a risk so um yeah on that power thing um i was i was thinking you know it's going to be hard to get on this environmental agenda globally when you got places like you know india 70 coal you got other countries reverting back to using coal because of the energy shortages there's there's serious energy shortages globally and you know they're going to turn up in india for example they're going to turn the power off for four hours you know in rotation here and there and everywhere and we've we've seen some of that in the us before too but um you know we got uh we got some significant energy problems so we haven't arrived at the time in the future where everything's powered by the sun we haven't got there yet good i picked in the almanac i picked up a couple possible good trades for the week so healthcare has been down pretty big last month minus 6.1 percent during the week two it's the poorest uh of the the sectors but during mid month seasonality uh it's expected to to be pretty good performer things like xlv or even xbi the biotech those might be good out performers come mid month seasonality um any thoughts on health care well i like i like what you're suggesting here because we have had that discount and and the same argument is for the technology stocks some of them have pulled back pretty substantially so i mean it could be an argument for technology as well but when you look at this the seasonality i i think that uh health care and and biotechs and stuff are supposed to outperform technology for that mid month seasonality right so yeah then i would definitely be like you know if i had a choice and i and i wanted to be you know kind of still mostly diversified but still concentrate a little bit of capital into some of the better ideas then yeah i'd be looking for health care stocks that have the best odds of of going up and best average performance i'd focus on the ones that really can give me some bang for my buck and you know might still choose a few technology stocks long but also a few technology shorts where i might not do any healthcare shorts so you know this is again every trader gets to decide what their exposure is but i don't i don't think there's anything wrong with combining sort of the seasonality context and then adding the macro you know also what's going on like normally i wouldn't i wouldn't be suggesting long oil this time of year like no the normal seasonality doesn't suggest that right but we had it we've had a macro disruption which has kind of overwhelmed that the only way i can explain this it's like you know an airplane taxing down the runway course southwest sure ground over a thousand flights they're not getting off the ground too well poor southwest but anyway um a plane taxiing down the runway and gravity's holding it down but if it gets up enough speed then lift takes over and lift lifts that plane off the runway and into the air and it overcomes gravity so the way i look at this is macro can influence so many things and and knock our seasonality out so for oil it knocked the seasonality out seasonality was fine in august but we rolled into september and towards the end of september last you know even the last two weeks i've never oiled started taking charge right and you know i'm not going to argue with it it's got a macro force behind it and it's also caught a lot of money managers flat footed and it's you know they just don't have exposure to it's a very small percentage of the s p 500 right and they just don't have exposure to it yeah so so you know we know where the crowded trades are everybody seems to be in the same crowded tech stocks for the most part and healthcare but um oil was one of those things that hey well you know we got to go esg you know can't have oil anymore can't use that nobody needs oil anymore i'm forgetting that even a tesla has quite a few barrels of oil that probably make all of its parts right all right well good stuff some good ideas um as we roll yeah so um i saw in curating my list i just saw a lot more shorts initially coming up as really good signals for tomorrow and i i had to downgrade some of my long you know qualities to to get the long coverage what did you find i haven't run my uh well just see let me know if later if you if you see the same thing you know it's easier to find really good short signals right now and it was and it's harder to find long signals if just let me know if that's the case so i i've heard a couple of first round eight to one ratio belongs to shorts so this is that well yeah that's been the way it's been for so long right but um it's been changing i noticed that changing already in september it's changed a bit in october i've had a lot a lot of more easy time with shorts but like running for for monday it was you know like 30 percent more shorts than longs in terms of great quality stuff that i was looking for and then so i lowered my standard on some of the longs just to get my long coverage up right were you getting just as many uh symbols from the different signals you monitor and like rsi and percent bb do you get more shorts from one um signal than others no that i mean uh i did i i did streak scan i did uh percent b i did connors and and performance and all of them were consistent in giving me more shorts and long it's interesting anyway let me know what you see um so anyway we'll hit the ground running tomorrow and uh great talking with you that's it good luck thanks
