Coiled Spring Capital Mid-week report 4/10/24

Our report over the weekend was as straightforward as they come. Raise cash, play defense, be tactical, keep most of what you’ve earned in the stock market since the Oct ‘23 lows.

We hope our readers heeded our suggestion.

Here is the excerpt from last weekend’s conclusion page:

“…breaking key levels with gaps is not something to take lightly. Gaps are repricings…when they break in the fashion we just witnessed, we need to put more weight in that break….the weakness we pointed out a few weeks ago, seems more like distribution. And distribution takes place incognito, as institutions sell slowly. Selling slowly seems palatable but it usually ends in a rush for the exit when something, like a bad macro report, catalyzes it.

Today was that bad macro report with CPI coming in hotter than expected. The Russell Small Cap sunk over -2.5%. If you were advocating a long Russell trade (IWM), then you were gambling with the CPI report. That and you don’t understand simple market structure. We were actually advocating a long Russell trade last week, but we were proven wrong post the first gap down (white) and exited our trade flat.

Being wrong in the market is an inevitability, staying wrong is a choice. In that same excerpt above, we highlighted our previous mid-week report where we advocated staying with the large caps, mainly the Mag7 names.

“In our mid-week we recommended sticking with large cap longs as they tend to be safer and less volatile. That doesn’t mean they can’t go down, just less so if the market dislocates.”

This index held up unsurprisingly well today and still has a bullish posture to it.

When the market sends smoke signals, how do you interpret them? We like to think we do it as good if not better than most. Our last report had undeniable conclusions to reduce risk and get defensive. We even sold our energy longs on Friday to de-risk in front of the CPI. Those positions grossly outperformed the indexes since we recommended them.

It turns out that high inflation due to increased economic activity is good for energy stocks and bad for unprofitable growth companies. Who knew?

If you are tired of being on the wrong side of the market, we implore you to consider our newsletter. It’s offered for less than $25/month. Only premium subscribers will be invited to view our new portfolio/trading page and receive a significant discount before it’s made public. This offering will be going live tomorrow.

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