Trouble for the Married-to-a-Thesis Crowd

Markets have done a good job of punishing those traders who tend to stay stubborn in the face of evidence presented which is contrary to their convictions.

Case in point: The idea that stocks would swoon and gold would surge if Trump pulled the upset last week has been battered and bruised. True, the "FANG" names in the Nasdaq have come under some distribution and are at risk of a sustained rotation away from them. But gold and her miners were soundly faded and have barely looked back ever since. 

This morning, however, the precious metals and mining complex staged an upside reversal to green. To my eye, it is rather premature to declare this to be anything more than an oversold, relief bounce after the post-election drubbing. Moreover, sentiment seems to be more inclined to fade the banks, small caps, and go long Treasuries and gold miners instead of the other way around. In effect, the contrarian trade seems crowded at the moment. 

Thus, my main focus here is on staying sound in my approach, in terms of really honing in on those sectors which have benefitted from rotation while not getting carried away playing the long side in any sectors which have experienced notable outflows. 

Indeed, a few days of a reversion trade with banks coming in and bond rallying would go a long way to resetting chart for fresh entries into those dominant trends, long or short. But with the way sentiment is currently chomping at the bit to fade those trends rather than ride them we may not get it, just yet--At least not of a meaningful magnitude. 

More in my usual Midday Video for Members.