Ole' !
11/5/23 Prospero.Ai Investing (72nd) Edition (Weekend)
Very interesting week for the market, so let’s dive in!
Given the fact that we started the week short 5 and long 2, we ended it in surprisingly great shape. We are currently beating the S&P 500 by 66% on our 2023 picks, with a 63% win-rate per pick against S&P 500 benchmarks.
Our YouTube livestream is tomorrow 11/6 at 11 AM EST and another Wednesday 11/8 at 3 PM. To get calendar invites for them: sign-up link.
Don’t have our app yet? Use it to track your investments with Prospero’s proprietary AI tech.
Newer to investing? Looking for educational videos? Confused by any terms?
Click our glossary help file.
Ole' ! Outline:
Market Update
QQQ and SPY Net Options Sentiment and Portfolio Allocation
Portfolio Macro Strategy
How we are approaching the number of longs/shorts and sectors
Longs
Adds —> Keeps —> Drops
Shorts
Adds —> No Keeps —> Drops
Portfolio Summary
Market Update
For Tech: QQQ Net Options Sentiment > 25 = Bullish. < 15 = Bearish.
For Non-Tech: SPY Net Options Sentiment > 15 = Bullish. < 10 = Bearish.
QQQ returned 6.49% this week vs 5.85% for SPY. It was an insanely Bullish week! We wish we trusted SPY Net Options Sentiment more (which was all over this increase), especially when you zoom into only the last two weeks of data.
In hindsight, this last week was about one thing: The market deciding that the Fed was done with rate hikes. We see this clearly in the Fed rate probabilities.
This is what sometimes makes the market tough. Our SPY Net Options Sentiment was saying one thing, but QQQ Net Options Sentiment was telling a different story. In the last few months, the QQQ has been the more predictive of the two index signals.
In the middle of the week, we sent our paid users some sector analysis we’ve been working on. As we studied it more closely, we gained new insights into how to better control for risk of quick market turns, through diversification and better monitoring tools going forward. Stay tuned! But for now, we will adjust our guidance to more Bullish levels.
For Tech: QQQ Net Options Sentiment > 35 = Bullish < 25 = Bearish.
For Non-Tech: SPY Net Options Sentiment > 25 = Bullish < 15 = Bearish.
Portfolio Macro Strategy
We had been wondering aloud how the bets on % chance of a hike had been falling, yet we were also seeing Bear movement. That puzzle was corrected in a big way this week. With our key index metrics looking so Bullish, our view has changed alongside them.
For the foreseeable future, we will be targeting the Industrials Sector for long opportunities. We also have a new pick this week: WSO.
As a result, this week we’re going with 5 Bulls and 2 Bears.
Long / Bull Adds - Link to Below Picture
Only thing to note here, is that we selected MELI over AZO.We did this, primarily because we prefer the 17% edge in Upside Breakout, to the stronger technicals for AZO.
We also think KLAC might be the most exciting stock to own right now, considering what the rest of the market might not be aware of.
Long / Bull Keeps
META is a keep and returned 6.02% vs 5.85% for the SPY. It was kept as a long because it is still the best Bull in our Screener. At this point, we are less worried about Short Pressure because of its Bull momentum.
CMG is a keep and returned 8.10% vs 5.85% for the SPY. Screener rank is still great and technicals are strong as well.
Long / Bull Drops
TDG was added on 11/2 via chat to our paid subscribers. And is now dropped due to poor performance in our Screener. Covered 11/2-11/3 and it finished 1.42% and a Win, Beating the SPY benchmark by .51%.
TRGP was added 11/2 via chat to our paid subscribers, but is now dropped due to poor performance in our Screener. Covered 11/2-11/3 and it finished -2.36% and a Loss, Losing to the SPY benchmark by 3.27%.
Short / Bear Adds - Link to Below Picture
We are doing a special case study on XRX in our paid mid-week letter this week. It is a very interesting case study, because in its two stints in our newsletter picks, it has lost almost 10% each time. At the same time, in the model portfolio, we have 3 positions with an average return of +10%. This illustrates the importance of timing and how our methodology with the newsletter (only keeping our highest conviction picks) at times, can make us lose out on the payoff of when the market catches up with our signals. This is what occurred with XRX and the model portfolio.
HSBC and NL are pretty much the only shorts worth considering this week, so it was an easy decision.
Short / Bear Drops
JBGS was dropped as a Bear 11/02 via chat to our paid subscribers because it was filtered out of the above screen and demonstrated concerning Net Options Sentiment. Covered 10/29-11/02 and it finished +6.00% and a Loss, Losing to the SPY benchmark by 1.11%.
TRIP was dropped as a Bear, as it was filtered out of the above screen. Covered 10/29-11/03, it finished +10.06% and a Loss, Losing to the SPY benchmark by 4.22%.
MGEE was dropped as a Bear, as it was filtered out of the above screen. Covered 10/22-11/03 and it finished +6.06% and a Loss, Losing to the SPY benchmark by 2.85%.
PTCT was dropped as a Bear, as it was filtered out of the above screen. Covered 10/29-11/03 and it finished +5.51% and a Win, Beating the SPY benchmark by .34%
XRX was dropped as a Bear, as the technicals shifted. Covered 10/29-11/03 and it finished +14.77% and a Loss, Losing to the SPY benchmark by 8.92%
Portfolio Allocation
5 Longs: CMG, META, MELI, KLAC, WSO
2 Shorts: HSBC, NL