Unintended Consequences of Pandemic Stimulus
Friday, 22 January 2021
By James Woodburn
[5 min read]
- Chewbakker’s algo switches back into the market
- A record stock trade for Exponential Stock Investor
- The ‘Crypto Fast Lane’ is open again!
I had a fascinating conversation with the editor of Strategic Intelligence Australia Nick Hubble yesterday. We recorded it, and you can listen to it below.
But there are a few things to cover first…
Chewbakker’s algo switches back into the market
You may remember me talking about a new Dutch algorithm builder called ‘Chewbakker’. He joined the team last year.
His algorithm has been live for almost two months now, although I’ve been using it since the start of August with some of my own capital.
It’s been a busy time, with many switches into and out of the markets.
This in and of itself is telling…and also unusual.
The unique thing about this algo is that it tracks the hedging activity of market makers. When they’re paying more to cover their positions, it tells you they are nervous.
This doesn’t mean a crash or correction is definitely coming. But it tells you that those making the market are worried.
Lately, and perhaps unfortunately considering it’s so soon after launching, the algo is spitting out a cluster of signals. While these clusters did occur in backtesting, they are unusual. And when it happens, it means the market is at a high level of stress. The chances of a big correction are deemed higher.
Frustrating as it may be for those following the system (including me — I’m following it to the letter), that is telling us something invaluable: to be on alert.
Markets might be going up, but they are getting ever riskier.
Chewie follows many indicators that show this. One of them is the so-called Put/Call ratio.
Here’s the chart he showed to First-Mover Algo Alert subscribers yesterday:
Source: First-Mover Algo Alert
This chart is a multiyear weekly chart of the SPX (top) and the Call/Put ratio (below).
See the green vertical bars in the bottom part of the chart?
They mean there are many puts in the market (people who are negative). And the red lines indicate ‘too many’ calls in the market (people who are overly optimistic).
The idea behind this indicator is to tell you when everybody is running in the same direction or not. When that happens, the market will tend to reverse.
Chewie says it’s pretty good at telling us when we are close to a bottom (you can see the cluster of greens at the 2020 low).
However, it also works for indicating tops, but in a longer time frame.
Right now, you can see many red bars later in 2020 and to start this year.
But right now, the algo says to enter the market, so that’s what I’ll do.
I love this system. So, I’m sticking with it. My initial capital from August is up 10%. I topped up my account in late November, just before Chewie’s service went live. And I’m slightly down on that capital. Such is the result of the cluster of signal changes.
But if there’s one thing I’ve learned, it is to just trust the system. I’ll keep you posted on how I’m going.
For now, it’s ‘risk on’ and back into the market.
Talking of risk on…
A record stock trade for Exponential Stock Investor
I have to give credit where it’s due. And big credit goes to Ryan Dinse and analyst Lachlann Tierney this week.
Their service was the best overall performer of all our advisory services in 2020. In fact, as Ryan pointed out in an internal email just the other day, their performance beat most of the professional small-cap funds. (I’ll get those details for you next week, if you’re interested.)
But they’ve kicked off 2021 in style, with perhaps the biggest recommendation gainer I’ve seen in a long, long time.
The stock in question is Strategic Elements Ltd [ASX:SOR], and they tipped it at 6.2 cents. Yesterday it was up to 89 cents — a 1,300%-plus gain.
I don’t mind revealing the name of the stock here as it is well above its buy price, plus Lachy recommended selling half the position this week. The move was too big not to take at least the initial capital out of the stock.
Anyway, fantastic work and it’s the kind of successful idea we strive to find our subscribers.
SOR seems to be locking to an important and emerging trend. And it’s one Ryan and Lachy have been right on top of…
Here’s how they described it…
‘In a nutshell, SOR is now going after human brain-like computing, ie: neuromorphic computing.
‘This is what BrainChip Holdings Ltd [ASX:BRN] does as well.
‘Back on 4 September we took half profits on BRN at 55 cents from an initial recommendation price of 17.2 cents.
‘That’s a tasty 450% gain.
‘Also, for the subscribers that have asked us, the initial BRN recommendation is missing in our system unfortunately, and we are working to restore it.
‘Back to SOR though, here’s a key passage from the announcement:
“Many in the memory technology sector believe that the future of computing will not be about cramming more components on a chip but in rethinking processor architecture from the ground up to emulate how a brain efficiently processes information.
“The artificial synapses fabricated by UNSW using the Nanocube Memory technology provides a potential hardware solution that has combined data storage and processing abilities, a key to neuromorphic computing.
“The technology has the potential to store a range of values (as resistance states), rather than just the traditional one and zero, allowing it to mimic the way the strength of a connection between two biological synapses can vary. Changing those synaptic weights (connection strength) in artificial synapses in neuromorphic computing is one way to allow the brain-based system to achieve self-learning.”
‘A printable brain using the Nanocube Memory ink technology?
‘Things are starting to get weird, but good weird.’
BrainChip and Strategic Elements are two companies at the forefront of this new age in computing.
A computer that thinks just like we do, and maybe much better.
This is why both stocks have gone ballistic. The possibilities and applications are near endless. And investors are excited.
As Lachy said: ‘Exponential growth in computing power is not going away, perhaps ever (think quantum!).’
And of course, he added a chart:
We’ll have more on this story in the coming months. But until then, you can check out more of the work Ryan and Lachy are doing in Exponential Stock Investor, right here.
Now, calculated speculations are one way to find gains of this nature.
There’s another place too, though…
The ‘Crypto Fast Lane’ is open again!
Over the Christmas break we put on a crypto trading event with Ryan Dinse (I know, he seems to be everywhere these days!).
Not only was it super popular, the timing was spot on, too.
Since then, the Bitcoin [BTC] price jumped up…then pulled back…and at time of writing it’s around 50% ahead of where it was back then.
But crucially, we’re still around 50% behind where Ryan believes it’s headed in 2021. Which means there’s a massive growth phase in crypto in the months ahead.
In recognition of this, for a limited time I’m reopening our Crypto ‘Fast Lane’ series and summit.
Now, full disclosure: This summit showcases the strategy Ryan deploys for his highly successful VIP crypto service Crypto Flip Trader.
However, there’s no need to pay anything in order to receive a ton of value and ‘how to’ reports from the series. Of course, if you want to subscribe eventually, great! But my point is, we made this thing packed with value, so you get something truly useful out it regardless.
So if you missed out back in December, I’d love you to be there for the rerun. There’s so much to tell you about…
Check it out here:
Now, yesterday I sat down with my old friend Nick Hubble…
He’s just finished writing the Australian chapter of Jim Rickards’ yet-to-be-released book, The New Great Depression: Winners and Losers in a Post-Pandemic World.
With Biden now firmly in the White House, get ready for a whole heap of crazy monetary policy…and the unintended consequences it will unleash…
Hit the play button below to hear what Nick makes of it all.
Have a great weekend.