Summary

Michael Belkin introduced his report as combining a weekly X‐ray of markets with forecasts. The econometric proprietary forecast model focuses on the direction of sectors, groups and individual stocks and has a particularly strong emphasis on sector rotation.

The model shows that in Europe investors should be extremely defensive - Food & Beverages, Utilities, Personal & Household Goods, Telecoms, Gold Miners, Healthcare and Real Estate in that order. Telecoms is a top buy recommendation despite it being out of favour and ignored. Telecom stock ratios to the index bottomed on April 16th and have had 3% alpha since then. Utilities, relative to the EURO STOXX index, have outperformed by 4% since March 3rd. Personal and Household Goods: 6% alpha since January 19 ^th. Food and Beverages: The Belkin Report’s number one sector recommendation in Europe right now has 7% alpha since March 3rd. Gold has 3% alpha since April 1^st and is up again this week. GDX is the ETF and gold has undergone a major correction, unlike anything else in the market since August. Gold has consolidated, gold stocks have sold off but they're taking off again.

The US equity market is a very good short - right here, right now. The NASDAQ just peaked in absolute terms a week or two ago. It’s unlikely to be 1929 again but it's an important top. Sectors that are sells are: Technology, Oil & Gas, Autos and Parts, Basic Resources, Banks, Industrials, Travel & Leisure, Insurance and Financial Services. These were a great call a year ago but now they have turned into shorts, both in relative and in absolute terms. Tech: Negative 5% alpha since February 12th. Oil & gas: negative 10% alpha since March 12^th. Autos and Parts: negative 8% alpha since March 30^th. If you read the headlines or look at what people are talking about, what the brokers are pitching, these are supposed to be favourites - It’s last years’ story. Industrial Goods and Services: Negative alpha 2% since February. It's been stuck near the highs, but it hasn't added any alpha in three months. Basic Resources: Negative 2% alpha since March 3^rd. Insurance: Negative 5% alpha since March 8^th. Financial services: Negative 4% alpha since April 13^th. Travel & leisure: Negative 11% alpha since March 15^th. So, the stuff that's supposed to be working in a recovery is not working in alpha terms. Beneath the surface of this supposedly strong market there has been this disintegration of really go-go groups. In the US fad groups peaked in February and The Belkin Report has been short electric vehicles which are down 41% since February. While the market has been making new highs, these fad-group tech shorts have worked brilliantly. Cannabis is down 36% from its February peak, and that's before this week where it's gone down more. SPACs are down 25% since February. Kathy Woods ARK fund is down 26% and broke its 200-day average this week. In cloud software, a favourite sector stocks are down 25%.

On the Macro front Volatility is extremely depressed, but it’s a buy and the way to play it is VXX ETF. Volatility sellers have felt bulletproof, but volatility is going to rise. That means bigger percentage swings in the market both up and down, but the market generally trades down so you get these kinds of lightning bolt patterns; sell the rallies. Treasury Bonds are up significantly. The TLT ETF is a buy and it doesn't make a lot of intuitive sense. People say: “Are you crazy”? but that is perfect contrary sentiment. So as a risk off asset allocation trade, bonds could get lifted as they did in ‘87 crash. When people move out of equities, they move into defensive plays and one of them is Treasury bonds. It’s not going up 40% or anything but they’re not a short and there could be a short squeeze in treasury bonds: 10 to 15 points potentially.  

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