Current Focus List
The VoSI Focus List is a compilation and reference list of stocks for which Pocket Pivot or Buyable Gap-Up Reports have been issued and which have been deemed suitable for inclusion on the Focus List. Not all stocks for which a Pocket Pivot or Buyable Gap-Up report has been issued will necessarily be added to the list. It is not intended as a "buy list" or a list of immediately actionable recommendations. Stocks on the list may or may not be in proper buy positions, and investors should exercise discretion and proper judgement in determining when and where stocks on the Focus List can be purchased. The following notes are intended to assist in this process. Please note that members can enlarge the Focus List image by clicking on the body of the email and then holding the Control Key while pressing the "+" key until it is large enough to read.
From an individual stock perspective we find the situation to be in an interesting paradox. As the S&P 500 Index makes all-time highs, we are seeing our leaders watch list diminish by half. As well, we do not see any stocks that we feel merit inclusion on our Focus List as areas of potential intermediate- to longer-term interest.
Semiconductors were the group du jour this past week as the VanEck Vectors Semiconductor ETF (SMH) broke out of a choppy low-base range on continued comments from major semiconductor firms like Intel (INTC) the prior week and Micron Technology (MU) this past week that they intend to ramp up production in order to address the current chip shortage. Because this implies that these companies will be investing in more chip-manufacturing equipment it has been mostly favorable for equipment makers like Applied Materials (AMAT), Lam Research (LRCX), and KLA Corp. (KLAC), among others. These stocks broke out of bases this past week, and can be considered actionable on that basis if they are not out of buying range, but with the semiconductor shortage dominating the current headlines the question is how much of this baked into current prices.
Meanwhile, we see scores of former leaders among FOMO names in the electric-vehicle, SPAC, space, cloud and other previously highly speculative areas of the market that have been cut down in severe price declines. At the same time, the collapse of extremely over-leveraged hedge fund Archegos Capita brings to light the fact that the extreme use of leverage can cut both ways. Archegos Capital's use of a new type of derivative known as contracts-for-difference enabled it synthetic ownership of stocks through the use of anywhere from 8-to-1 to 20-to-1 leverage. The price breaks in its holdings over the past two weeks have been brutal as Archegos' prime brokers have had to unwind positions taken by the fund. This brings to mind the old adage, "If you see one cockroach, there are probably many more."
If Archegos Captal was making use of these new types of derivatives, then it is a prudent question to ask how many other such funds and family offices out there have done the same thing? Extreme QE liquidity fuels extreme speculation, and Archegos is a real-time example of the consequences of this level and type of speculative activity. In our view, this adds an added dimension of risk to this market, as one would certainly not have wanted to be long stocks like those shown above when a fund owning these names is forced to liquidate.
Treasury Yields continue to remain at elevated levels, with the 10-Year Treasury Yield ($TNX) posting new highs this past week before settling in to close Friday's truncated trading session at 1.714%. The chart below shows the $TNX as of Thursday's close and does not include Friday's data. Yields rose in response to a "blowout" jobs number, and may influence stocks in the coming week. Stock futures on Friday morning initially rallied on the jobs number but reversed to close below where they were before the report was released. Keep in mind we have the first stimulus package of $1.9 trillion that is now in effect and a proposed additional $2.25 trillion stimulus package that addresses infrastructure issues, for a total of $4.15 trillion. The coming waves of QE are not insignificant, but in the meantime, we will closely watch yields on the longer end of the curve and movement in the dollar.
The Market Direction Model (MDM) switched to a BUY signal on Thursday, April 1.Note that this signal is subject to the usual risk-management criteria if the market situation changes quickly.
Bitcoin is again testing its highs along the $60,000 level, resulting in similar action in the Grayscale Bitcoin Trust (GBTC) which is tracking tight sideways along its 10-day simple and 20-day exponential moving averages as volume dried up to -49% below average on Thursday. This puts GBTC in a buyable position as a Voodoo type of set-up using the two moving averages as tight selling guides.
The Sprott Physical Gold Trust (PHYS) posted an undercut & rally (U&R) long entry on Wednesday as it pushed back up through the prior early March low at 13.26.
The Sprott Physical Silver Trust (PSLV) posted a U&R on Thursday at its prior early March low of 8.84 while bouncing off the 200-day moving average. This remains actionable here using the 8.84 low as a selling guide.