I’ve spent the vast majority of my career zeroed in on nuanced details of the energy, metals and mining industries that few people pay attention to. For instance, when mining operations complete work on one section and move to another, that often causes a change in productivity.
In turn, that causes a change in overall mining costs, which can cause some wild swings in future share prices.
Big moves like those can take you by surprise unless you happen to be paying attention to the minutia. So naturally, when I sit down to write each week, I tend to focus on things in the market that are hard to see.
Today, however, I want to talk about something completely obvious — the FAANG stocks.
Unless you’ve lived in a cave for the past five years or so, you’re familiar with large-cap “FAANG” stocks.
Also referred to as “FAANGMAN,” this set of tech behemoths include such names as Facebook, Amazon, Google, Microsoft, Apple and the slightly less enormous Netflix and NVIDIA.
These giants have comprised over 30% of the entire S&P 500 for much of the past year, so they’ve been an essential part of every investor’s portfolio.
If you didn’t have them, chances are you probably didn’t do as well as you would have liked. Frankly, I’m not even sure if I owned enough in my own PA.
But as old trading adage goes, “the trend is your friend…” and some of these trends are starting to not look so good.
The key to understanding price action in single stocks probably won’t surprise you much if you’ve been following along these last few months… it’s volatility.
Generally (but not always) when volatility trends change, so does price direction.
And if we were to look at a certain “fruit company,” we can see the change in trend and the patterns that go along with it.
In general, directional changes in the volatility of Apple Inc. (NYSE: AAPL) stock has been a leading indicator for changes in share price. When volatility rises, price declines and vice versa.
And currently, AAPL stock-price volatility (blue line in the chart above) is on a clear three-month-long uptrend.
From a fundamental standpoint, this makes some sense, as Apple hasn’t released a new product of note in a long time.
Without a near-term catalyst, there’s little reason to think there’s much near-term upside left — especially with still-challenging year-on-year comparisons coming up over the next three quarters.
But Apple isn’t the only one.
Facebook, Amazon and Netflix have also shown bearish near-term trends and have difficult annual comparisons ahead.
And although it’s not necessarily in the mega-cap tech names, I should also throw in electric carmaker Tesla here, as it’s been mired in a similar downtrend of late.
All this said, the mega cap space is not without bright spots — Google, Microsoft and Nvidia all remain bullish from both one-month and three-month perspectives. Just watch out if your portfolio happens to be weighted heavily toward any of the other four.
Speaking of which, those other four are huge components of the “momentum basket,” which has been getting torched of late. That means I want to fully divest of any exposure to iShares MSCI USA Momentum Factor ETF (NYSEArca: MTUM) and take any small gains that may have been posted.
One commodity that also got torched lately has been silver, for which I like to periodically get exposure to through its leveraged ETF, Proshares Ultra Silver (NYSEArca: AGQ).
And now is one of those times we want to get exposure, because unlike all those other stocks I mentioned, silver remains on a massive inflationary-driven, short-squeeze bull run.
I’m comfortable with a little larger initial entry here, as interest rates — and The Big Short’s Dr. Michael Burry — have been telling us that inflation is going to be with us for a while.
In fact, my Venture Society colleague Marin Katusa just mentioned last week that copper was essentially telling us the same thing.
This means game on for commodities, as this chart of all of them over the last three months can confirm.
So grab your bugle and saddle up, partners…
All the best,