The spread between the performance of OIH and SPY has been extreme for a couple of years now. OIH has gone nowhere now for 8 years, since 2006 and the SPY is up 48%.
The catalyst for this trade to unwind is simply the movement of funds away from the big-cap S&P500 stocks that have been lately making us all wonder how the market is staying up despite the big hits to technology and internet-related names. The generals are leading the army as the IWM Russell 2000 index is far from its highs. I think this is a time when it makes sense to be long the basic industries and short the overall index.
Keep in mind though, that I have a weekly buy signal on the SPY with a 184 stop. Pairs trading these positions in a portfolio would mean letting go of the SPY long position or cutting it down in size.
Is it me or are the latest ideas of yours Tim imply that stock indices are going down? I actually went to get some gold and raw materials today after seeing your charts
timwest
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I'm extremely wary about the S&P500. I see the year being a down 10% year for the S&P. Nailing the exact day, week, month of the top is a challenge, but you can see all of my posts on SPY and DIA and see what I'm thinking. I try not to hedge at all and make specific forecasts with stops in price and time. So, I think this is a fools game chasing these levels of valuation up here and there is tremendous risk to all risk-assets all at the same time. Cash and commodities are the only places to hide, along with currencies (of course).
A-shot
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Sadly i guess
timwest
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The commodity of choice has been oil and oil stocks for the last month - and gold, and gold stocks. They have far outperformed the S&P. Care to do the analysis before I do?
A-shot
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Im already increasing gold exposure, and i don't dare to do pair analysis - i fear i would find self prophecies in them that won't make any benefit for anyone. I sure learn a lot on this website about this though :)
A-shot
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Also, what about materials? Silver, gold, metals? Emerging markets - what is your take on them?