Prepare for Micro Quad 2

Intra week we made the transition to Quad 2:

I am pretty sure that this will carry into next Monday. Follow me on Twitter for an update on Friday evening —> @GfI_Himmelreich

NVDA earnings where a blowout: this is bullish for the market.

My small cap value momentum book is at new highs while indices are still in a drawdown (this is the most important point here, stuff like that does not happen in a bad market!).

—> This behavior underscores the Quad 2 Thesis. The system frontruns the quads in tapes that are getting stronger.

Breadth starts to base:

Yep, it is not as deep as in March, but still a good level risk / reward level!

Also, defensives got absolutely no bid in this drawdown, which is a bullish sign, XLP as an example:

Plus: we have the highest correlation of positive earnings surprises and corresponding upthrusts in prices since 1996: This market rewards good earnings developments (but this is also the other way around —> bad earnings lead to ugly sell offs!).

What I am doing now:

I will get rid of the IWM hedge tomorrow (Thursday), which has been profitable so far.

Plus, I will go to a 90% exposure long on my leveraged small cap value momentum book (the book is a levered one, e.g. that puts me at an approx. 120% long exposure).

If you went long XLE and short IWM on the Quad 3 call, I would close both trades. The trade was slightly positive.

What should work from here:

• QQQ long (I prefer it over XLE in a Quad 2!)

• Small Cap Value Momentum (esp. with an earnings tilt!) —> I think SCVM will stay strong the whole year!

• CANSLIM (get your watchlist ready!) —> I prefer small and mid caps!

No touch:

• IEF, TLT (wait for a bullish trend!)

• ARKK names with no earnings

• Gold

• Defensives (XLU, XLP etc.)

Sorry, but this is the name of the game. Quads can stay for a longer time, but they can also change fast. Week by Week!

All the best and best regards.

Andreas

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