My mantra is simple and what drives my Macro-To-Micro trading style: Policies lead economy. Credit leads equities. And Volatility reprices everything.

My Gone Fishing Newsletter is divided into basically three parts:

  1. Reflections and Inflections
  2. Sector Watch
  3. Macro Considerations

I was recently asked to present my 2021 “Look Ahead” for StockChartsTV CHARTING FORWARD 2021, “a yearly market outlook special featuring technical analysis icons Tony Dwyer, Rick Bensignor, Samantha LaDuc, Mary Ellen McGonagle, Craig Johnson and Gina Martin Adams.”


This is timely in that I see the next year as a transition period, or inflection point, for markets.

  • Since Major Volatility reprices everything, I will start there.
  • Bonds are the bigger market over equities so how will they perform?
  • Gold is the collateral against which many firms leverage and hedge so positioning matters.
  • Momentum or Value, which will outperform?
  • Major trend changes are afoot, so it’s time to prepare.

2021 Major Observations

  1. My Stock-Bond-Volatility ratio analysis suggests explosive bouts of volatility interspersed with explosive rallies. It’s called “Distribution” … in market lingo … and should continue throughout 2021 leading to larger volatility events starting 2022.
  2. My Macro and Intermarket read of Bonds/Treasuries indicates they will continue to frustrate fixed income and portfolio managers as their ability to provide ‘risk-free’ returns diminishes as real yields rise at the same time the ‘usual’ rotation from stocks to bonds in times of market turbulence fails to materialize and bonds do not serve as a hedge against volatility. Sometimes Gold has served as a hedge, sometimes Bitcoin. For 2021, I believe the US dollar will become en vogue again as a hedge.
  3. My Gold analysis to swing short the Precious Metals complex back on August 6th continues to prove correct – as fiscal policy takes time to pass, as real yields continue to rise, and as inflation expectations front-run actual inflation.
  4. Since early September 2020, my recommendation to clients was to position for Value to outperform Growth. Since we have seen FANG or MAGA stocks digest sideways for six months and in fact, the rotation from Growth (in the form of Big Tech) to Value (in the form of Cyclicals and oversold, left-for-dead short squeeze candidates) has materialized. I contend this “factor rotation” into Value continues to outperform Momentum – or said another way – Anti-Momentum/Small caps continue to outperform Momentum/Nasdaq.
  5.  As part of my “Anti-Momentum” rotation thesis for Q4 of 2020, we have seen an out-sized rotation into Commodities. This theme has continued into the new year – especially industrial metals, oil & gas plays, and agriculture. I contend, this is the beginnings of a bigger move, but not without being tested – starting now. From my CRB:SPX ratio analysis, it is clear to see that for over a decade, Stocks have outperformed Commodities. Now Commodities are attempting to push through multi-decade lows as they rally into strong resistance. Jumping the shark on the first attempt would be rare – without a major geopolitical or currency event – but I do believe we will have a better picture of this transition by end of 2021 wherein Commodities, in time, will outperform Stocks.

Sector Outperformers:

  1. MAGA politics rallies while MAGA stocks decline.
  2. SEMIS succumb to set backs as China intonates dominance over Taiwan (where the most semiconductor chips are produced) and Technology (chip-fueled) is pressured by both Republicans (backlash for censorship actions of late) as well as Democrats (posturing with anti-trust and regulations).
  3. Small Caps and Short Squeeze candidates produce more upside surprises compared with Growth/Tech plays that have pulled forward valuations/earnings growth that ultimately disappoint and get revised downward.
  4. Bonds are a bigger risk to the downside than upside.
  5. Oil has issues with $60 (above is actually bearish equities)
  6. Energy over EV (oversold versus overbought)
  7. Cannabis over Crypto (after a pot pullback and crypto call does not include Ethereum which is a better blockchain play)
  8. Old Gold over New Gold (both underperform, but Bitcoin falls more).
  9. Biotech and Bugs (both biotech, healthcare sectors perform well relative to many ‘growth’ sector, as does Cybersecurity)
  10. Gaming stocks over Guns (one trend is worldwide, the other primarily US)
  11. SPACs over Treasuries (until negative real rates in investment grade corporate bonds reverses higher)
  12. China over US

Intermarket Chart Attack

The recovery from the devastating effects of Covid, a Biden/Harris victory and a Blue Wave are very likely priced in. Where does that leave us as he head into 2021 after a euphoric run in markets? More likely distribution than a continued climb higher.

Pretty much every chart of out-performance looks like this one of Semiconductors – very elevated on every time-frame from daily to weekly to monthly.

Which leads me to why I believe we are in a distribution period where in time, Stocks will rotate to Commodities for out-performance.

But not without turbulence – as this CRB monthly chart shows lots of resistance dead ahead.

My ‘Growth-to-Value’ rotation theme since early September is still in play.

Small caps still have room to go – up! Laggards will lead… small cap Energy and Financials for example.

Gold will not lead – well maybe relative to Bitcoin, but that’s another story. In short, both are ‘liquidity’ trades and both will be under pressure.

Yields are the wild-card and tightly connected to commodities – both their rise and fall. Keep eyes on the 5yr as inflation expectations front-run actual inflation.

And speaking of inflation making the (bond) world go round – IG corporate bonds now have a negative real yield for the first time in history. This is an outlier waiting to revert…

Finally, a continued bear steepener of the yield curve is more likely than not, putting pressure on bonds and equities.

2021 Targets for StockCharts

(1) What do you expect will be the top performing S&P sector in 2021? COMMODITIES – OIL, PLATINUM, URANIUM – with BIOTECH close behind.
(2) Between the US, EAFE and Emerging Markets, what do you expect will be the top performing index in 2021? CHINA over US/EUROPE
(3) Between US Large, Mid and Small Caps, what do you expect will be the top performing market cap group in 2021? SMALL then MID then LARGE CAP
(4) What do you expect will be the top performing S&P 500 stock in 2021? Some highly shorted issue like my $4 to $40 GME play since August. Maybe GE. Or an oncology play like NVTA, CRSP… but not Big Tech!
(5) What is your expected year-end target for the S&P 500 in 2021? I am loathe to provide year-end price targets, but I will provide my year-ahead targets for outperformance. 
(6) What is your expected year-end target for gold in 2021? Not what others expect… closer to $1500 / $150 GLD.