The last week saw another round of selling in US mega-cap tech stocks and some buying in smaller companies in the US.
But the great rotation isn’t yet filtering through to Australian small and microcap stocks.
The Aussie market is heavily weighted towards resource companies in the smaller end of the market and commodities have turned down sharply over the last couple of months.
Copper made the news a few months ago as it spiked from US$4.00/lb to over US$5.00/lb in April and May, setting a new all-time high in the process.
But fast forward to today and it has collapsed back to US$4.13/lb.
What gives? Is it all over for the hyped ‘copper will go through the roof’ story we have all been reading about for years?
Or is this correction setting itself up as the trade of the decade for the prepared investor?
Personally, I think it is the latter due to the long-term uptrend in copper that has been in place since 2016.
I give you a short overview of the situation in today’s Closing Bell, but I think it will be worth drilling into copper in much more detail over the next few weeks to prepare you for the opportunity.
I think the lower copper goes now, the better the long-term opportunity will be.
But if you’d prefer me to focus on something else over the next few weeks such as education about money and risk management or various aspects of my trading model, please write a comment below the video on YouTube.
You can find the playlist of Closing Bell videos on YouTube here if you’d like to leave a comment.
The selling in commodities hasn’t been restricted to copper, with zinc, lead, nickel, lithium, rare earths, uranium, oil, and aluminium all falling heavily over the past month.
That could be a hint that restrictive interest rates are really starting to bite, and growth may be about to nosedive.
China’s third plenum held every five years, failed to inspire much confidence that a stimulus was on the way to prop up their very weak property market.
Whatever the cause of the selling across the board in commodities it is worth keeping an eye on as the selling in the Nasdaq gathers steam.
My own investing style likes to see plenty of volatility, because then I can capture quick moves to take part profits and create free call options.
The current low volatility and sideways trading with only a few stocks trending higher isn’t ideal, so I am treading very carefully, trading sparingly and waiting for more suitable conditions.
But a momentum follower can do well in a market like this because there are only a few stocks trending nicely. If a stock can rally in a market like this it must have something going for it, because most stocks are drifting.
My golfing buddy and short-term trader Callum Newman has been shooting the lights out lately following momentum and jumping on the stocks that have been performing well.
He filters stocks through his AI algorithm [SCARLETT] and then chooses the best from the list of possible candidates. It has certainly been working for him because he has jumped on some great trades over the past few months.
So if you want to gain a better understanding about what he is up to and how he has managed to pick a bunch of winners in this market then check out his presentation here.
In today’s Closing Bell video I look at the situation in the Nasdaq after two weeks of solid selling pressure. I then take you through the major commodities copping a beating at the moment and show you the big picture in copper and why I think it is shaping up as a great trade in coming weeks.
Regards,
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Murray Dawes,
Editor, Retirement Trader and Fat Tail Microcaps
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