My Top 4 Trade Ideas from Q1 Earnings
A 9-day market surge and standout earnings have set the stage for this week. Here's what I'm watching...
The market rally continued last week with the SPX +2.9%, NDX +3.5%, and RTY +3.2%.
The S&P 500 just closed Friday with its 9th consecutive session in the green, which is its longest winning streak since 2004 and erases all losses since April 2nd. A 9 day + winning streak has only happened 14 times since 1970. Below are the historical forward returns after a 9+ day rally, presented without bias.
What’s Driving This Rally?
Repositioning.
Positioning has been the dominant force behind the market action all year, overshadowing any tariff headlines or economic data.
As I have detailed each week at Marlin Capital, the market’s movements since January have been driven by historic shifts in investor positioning.
I recapped this dynamic in detail in last Monday’s report “Repositioning Rally”, but I will summarize below:
At the end of January, everyone was “all in” US equities. The SPX was at record highs and total investor positioning (Institutional + Foreign + Retail) was at all-time highs. Life was good.
Then, the looming Trade War began to spook investors (particularly institutional & foreign). Hedge Funds & Foreign Investors dumped US stocks at a record pace in February and March. This massive selling led to the -21% SPX selloff, as total investor positioning reached ~15yr lows heading into Liberation Day.
Days later we got the 90-day tariff pause announcement (just as everyone was underweight US stocks). The VIX peaked, triggering this repositioning and short covering rally we have seen for the last month.
So, where do we stand now?