Everyone Is Starting To Realize...
182: The Weekly Selection
Introduction
Hello and welcome in to another iteration of “The Weekly Selection”. Before we jump into this weeks look ahead, explore the latest podcast episode and articles below:
In these, I discuss the photonics bottleneck for datacenters, and my opinions on why I think the current environment in stocks is going to create a parabolic blowoff in markets. Enjoy.
News, Indexes, Gauges
Over the weekend, news broke that there are more hiccups in the Iran-US Strait of Hormuz deal… yawn. As you all know by now, I am of the opinion that this situation in the middle east is not super impactful to markets for a few key reasons:
The key drivers of the economy are not as reliant on oil as they once were
The AI tailwind is the strongest economic driving force I have ever seen
Trump will do anything to ensure the market goes higher
In a world full of commentators and impression farming narration, I hold firm that this publication is one of the only ones that has remained optimistic and long U.S. equities through this downturn. This has led to superb performance that can be tracked easily.
Taking a look at the indexes, we can see some key features:
This 12 day winning streak was the longest streak since 1992
The S&P 500 returned to ATH in 11 days, the fastest since 1928
Anyone who looks at these stats and thinks “the market is over heated, I need to short” is frankly a moron and should not be managing money. I don’t say this because I think the market goes up from here, but more-so this thought process exposes a deeper rooted issue in failure to see the bigger picture in what strength like this represents.
SPY: Chart annotated accordingly. Truly spectacular to have been over 95% exposed to this entire run, sending my portfolio to mid double digit returns on the year by April.
S5FI: Stocks above their 50DSMA just eclipsed average over the last 200 weeks. Historically, this has created an incredibly strong environment for traders. Key selection include the bounce back from covid in the summer of 2020, post recession fears in 2022, and the fall of 2024 mortgage crisis. In all these instances where we returned to average with velocity, the run surged for at least another month.
regardless of what news comes out over the next day, week, month, I will continue to use the process that has made me meaningfully successful in financial markets: If its not worth more than AI to the economy, the drawdown wont last, remain long.
Looking Forward
Futures open in an hour as of the writing of this post. I would usually post this after futures open with weekend news, but I am feeling confident so I’ll make a call on my own: If futures open down, I will be looking for stocks to get more exposure to.
My list is as follows:
AAOI TER AMPX BE AXTI LITE RKLB CAT KRKNF PL VIAV ARM DOCN MRVL DELL AEHR SNDK COHR YSS
Of these, check out my thoughts on ARM DELL and AEHR:
DELL: The key with DELL here is that it turned up a lot sooner than most stocks did. This relative strength from earnings in February has now driven this stock to ATH. One of the drivers here that is seldom discussed is market share. I don’t know specific data, but with SMCI effectively out of the game, I think there is reason to believe DELL is getting more packaging contracts, which should drive a reasonable repricing higher. After all, we are barely higher than prices in 2024, before the huge acceleration in CAPEX on datacenters.
This is the ARM monthly Chart. This chart will get very exciting over $180, otherwise, I am not interested. ARM underwent a parabolic blowoff style move in early 2024, and that has kept price pinned beneath since then. As we know, parabolic stocks struggle to continue higher in short time periods without major catalysts. I think a huge deal for ARM to produce chips for a hyper scaler could unlock this chart and begin to send it higher.
AEHR next to AEHR 2022 above. Back then, markets made a lower low into the October candle that printed the bottom. AEHR made a significantly higher low on the expectation of success from its wafer level testing kits for chips. This is a crucial component of chip production, and right now, I think they are positioned to grow given the much larger market size in datacenter oriented chips versus the 2022 EV chip hype. This one can definitely use a pullback to buy, but look at their history of success in high SOXX growth environments. Very Telling.
That’s all I’ve got for you today! This should be a super exciting week, good luck out there.
Nice work T