What Is Going On In Today’s Market? The Cestrian Circle Newsletter.

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Welcome!

by Alex King, CEO, Cestrian Capital Research

This is the first issue of the Cestrian Circle Newsletter. This will be delivered twice weekly to all our Cestrian Circle service members.

(If you’re an Inner Circle service member you can always find these newsletters on our website, but we won’t deliver them to your inbox because you will already have received the content earlier, whether in the daily Market On Open notes, or earnings reports, in Slack Chat or on a live webinar).

I wanted to kick off with a brief take on the state of the market at present. At Cestrian we try to keep it all-business; whatever might be going on in the world we believe our job here is to stay focused on what it means for markets. It means we can focus on signal - specifically, price and volume - and avoid noise - meaning narrative and opinion.

The S&P500, Nasdaq-100 and Dow Jones-30 are all very close to their all-time highs, and yet sentiment is terribly negative. The selling in the equity indices and their component stocks started well before the war in Iran, so we cannot pin the price action on a war reaction. We can have an opinion that selling amongst large asset managers may have begun when the whiff of war was in the air; if so, we should congratulate them on doing their job, which is to be ahead of the market. If you are a senior manager at a large asset management shop it is your job to be in the room, or at least just outside with an ear to the door. If you aren’t in such a privileged position, it doesn’t really matter, because you have easily available data to help you work out what to do - that data is stock prices and volumes. If you can learn to surrender your opinion about what may be going on in the world and why, and learn to focus only on what matters to the market - price and volume - your ability to (i) lose less money and (ii) make more money will be greatly enhanced.

That chart alone is not so scary; if markets were about to melt I would guess that the Nasdaq would be falling first and fastest. Instead it is the Dow which has fallen furthest in the year to date.

So will stocks rise or fall from here?