JACK FARLEY: Welcome to the Real Vision Daily Briefing. You're watching a special live edition. I have the privilege of being joined by Tom Thornton of Hedge Fund Telemetry. Tom, how are you doing?
TOM THORNTON: I'm doing great. Just another wild week in the market and the close here. I don't know what happened, but somebody had their elbow on the buy button and just jump things higher which is pretty amazing.
JACK FARLEY: We were on the call about 10 minutes ago just to prepare because we're going live. Back then, the NASDAQ was up about 0.9%. We've closed up about 1.3%, so as you say, absolutely roaring into the weekend. Tom, what did you make of the price action today as well as over this past week?
TOM THORNTON: Well, what I've been seeing over the last two weeks, especially with the NASDAQ has been a series of lower highs happening. When markets start to correct or get a little choppy on the downside, I like to use the 60-minute timeframe looking at charts and you can really see where they get whacked down and then the dip buyers come in and then they get disappointed and have to sell and we just carry this pattern.
I think it's just a bit of a rotation, we had small caps and the reopening stocks just got murdered in midweek and then they just came roaring back. I think there's a lot of liquidity in the market, there's a lot of hope and [?] willing to put money to work. My view right now is that the market is starting to see some distribution and we're seeing it with a lot of the technical indicators that we use.
JACK FARLEY: When you say distribution, do you mean breadth and that a broad amount of stocks are participating in the rally?
TOM THORNTON: Well, we're starting to see the momentum shift a little bit. We're seeing just very simply the percentage of stocks within ETFs or markets above the 10-day moving average, above the 20-day moving average, those are starting to turn red. That might be just a function of those moving averages flattening, but sometimes when they flatten, they go down as well. A lot of things in the NASDAQ have already started to roll over. The 50-day moving averages started to roll over, the 20-days cross the 50-day.
Some of it could be headed into the end of the quarter, position squaring. Today was pretty extraordinary because we're watching a list of about 12 stocks that were just getting liquidated. When I say liquidated, Viacom was just cut in half in two days and Discovery and some of the Chinese names. I have some speculation of who it might be, there could be a big fund that might-- I've heard a tiger cub fund perhaps, no guarantees or confirmations that I know any of the players in this, but it could be Softbank. They've had some liquidity issues.
The thing that makes me think it's Softbank is if you look at the tech stocks from last summer and they were just on this parabolic move up and every sell signal that I got failed immediately and then they just gave up and stopped and that's the same pattern if you look at Viacom and Discovery and a few of these others that are mentioned as those liquidated. Those look like the same trader was buying them, and that's my speculation that could be Softbank. We may never know, we may know.
Softbank, also, it was confirmed that they are under SEC investigation for their trading last year in the gamma squeeze, so I don't know who it is. We'll see in the coming weeks who sold 33 million shares of Discovery. The thing that's crazy about this, it's not just like the top 10 holders. Some of these funds that have been mentioned aren't even in the top 10 and maybe some of it is traded on swap through a large broker like Nomura or Morgan Stanley, so they're hidden who owns them. Whoever was selling them, that's the number one or two largest holders of the stock and that to me says that they jam these things up, and they just got forced liquidation here today. It was pretty amazing.
JACK FARLEY: Just for the context of everyone watching, there was a pretty significant market event today. Tom, you and I were actually on the phone preparing for this earlier this morning and you just got a Bloomberg alert or something. You said, wow, there's this huge market event. A big fund liquidated at a large percentage or perhaps their entire position in Viacom, Discovery, Shopify, Baidu, and those stocks expectedly had a rough day.
Tom, what does it mean to you when a fund has a forced liquidation? What's the significance of it? What are the mechanics? If you were a fund manager and you were forced to sell, why would you even be forced to sell?
TOM THORNTON: Well, I actually know about force liquidation, personally. That actually was over a month. Something happened here, something snapped. Maybe this fund had the wrong trade with the recent bond market collapse. I don't know, they may have had some European entity go bankrupt and they were in the hole $400 million.
There's a lot of people out there that use leverage, and a lot of funds use leverage. I've rarely seen forced liquidations when leverage isn't involved. I am assuming whoever it was, was levered to the gills and they got a tap and said, we've got to just exit. They called up Goldman Sachs today and said, hi, would you mind doing a trade for me? 12 of them, and it's probably about 200 million shares. That is probably it.
Having it been one day, or it might have started the last couple days, because some of those stocks had already started to move down. It just got to the point, like get out by February or excuse me, Friday, at the close. That's what happened today. It became very evident that these stocks were under fire. Now, actually I bought some of those stocks, I bought Discovery and Viacom market on close orders, just to play the cleanup trade. If this large seller is gone, we could see a relief rally in these names over the next week. I'm happy to do that. I've done a lot of those over the years.
JACK FARLEY: Buying the dip. It's not just a slogan, you exerted that trade. I'm interested to see how that played out. Tom, it's important too for the people to know, everyone who knows, is familiar with the phrase, a short squeeze because of GameStop, when you're forced to buy it back when you use leverage when you short something. As you mentioned to me on the phone today, there's also something called a long squeeze when you buy at margin and you're forced to liquidate, and it sounds like that's exactly what happened today.
TOM THORNTON: Well, there's another dynamic to it. A short squeeze is a very heavily shorted stock. When there's good news or a stock starts moving up, like GameStop, the shorts have to cover, and it just creates another source of buying. Now, on a long squeeze, I think we saw one of the biggest long squeezes ever back last March. It was because nobody was really short airlines, nobody was really short the cruise lines and the retailers. The short interest on those were actually very low until they got to the very bottom and then shorts started shorting at the wrong time.
If you don't have that natural buyers' short cover, you're going to have a deeper pullback on things. That's exactly what I like to look for in a stock where the shorts have just given up or they just don't have the confidence to short them. A lot of them last year were value stocks and people have just given up on trying to short those. Now, there's some long squeezes out there. Nobody was really short Viacom or Discovery. It's not a heavily shorted name, but maybe they were a little bit in the last week, but it's a value stock.
JACK FARLEY: Tom, a few minutes ago, you mentioned the Fang stocks, the big tech, the mega cap stocks and how they were surging early on in the pandemic, but over the past six months or so, they've pretty much been trapped in a range and some of them even down, so they passed the baton on to the small cap stocks as well as the uber growth stocks, as well as SPACs. Now, all of those trades are fading, and I think even over the past, let's say 20 days or so, I think the Russell 2000, small cap stocks is actually are down, not up. Where do you see this going forward, Tom, in terms of sector rotation?
I know you've been on Real Vision earlier this year talking about inflationary fears that could rattle high growth stocks like Tesla, like DocuSign and even proved largely right. You're interested in reopening stocks like energy, but I understand now that you've gone out of energy. Tell me about, where's the baton in terms of leadership, where's the baton going to be passed to next in terms of sector rotation?
TOM THORNTON: There's a lot to unpack there. I've thought that the parabolic move in tech, these mega cap stocks could just cool off and they have, and they haven't really done much. They're funds to trade in little ranges, but they haven't really done much. Even when they reported earnings, they really didn't get the bang on the upside and a lot of semis as well. I was speaking to a technology portfolio manager in Asia the other day and he's like, I just can't believe that NVidia just had such a great number, the stock went down and I'm like, well, it's crowded.
I wouldn't be shocked to see tech take a breather and we have earnings coming up and the comps are going to be in the next couple quarters tough for them, because they really did well with the stay at home trade. We'll see what happens there, but as far as with Russell, the Russell really was littered with a lot of value names and regional banks and tons of energy and materials and retailers and a lot of stuff that doesn't make a lot of money or they actually zombies. But still, like the energy back in September and October and I got mega long and I was on Real Vision with Ash and saying, yeah, I love it because I think Joe Biden's going to be president and I think he's going to be the best thing that could ever happen for energy and everybody was like, wait, what?
Everybody thought that with Trump and then Trump said let's drill, drill, drill, and what happened is you had too much supply. Now, I think Biden's putting some clamps on the drilling activities and that the supply/demand picture will work out well for the bulls. I did sell all my energy stocks recently. I'm doing this, I sold it right before the peak and the next day, I thought, crap, I sold too early. I just am looking for places to buy them back. I think there's still a lot of juice there, they're a terrific reopening play and inflation play.
I also like financials and I am also hoping that we'll get a pullback. We haven't had a pullback enough. I'm basically on the sidelines with those. I did buy consumer staples today. As far as the rotation trade, consumer staples always seem to gravitate towards the top of my list when markets get a little dicey or I see some liquidation or distribution because they're very dependable. They're very dependable earning type stocks, Procter & Gamble, Wal-Mart, Coke, Pepsi, a few others I bought today, and I bought the XLP Consumer Staples ETF.
Those are just pretty much hiding places. They've had a little bit of a run so far, and there's still a little bit more they can do. I'm not looking for them to be this giant outperformer, but I'm looking for places to park money and get a decent return.
JACK FARLEY: The fact that you, as you say, you're looking to hide your money, park your money, that sounds there's perhaps something dangerous out there in the market. If you were very constructive on the whole market, I'm going to guess you probably wouldn't have to hide. Tell me about that, why do you have to hide?
TOM THORNTON: I tend to get accused of being too bearish, but I tend to pick my spots and I buy when things are oversold and market sentiment gets to levels that are overdone. Back in March, I was on Real Vision and a couple other chosen, I was telling people I'm buying like crazy. I covered all my shorts and people looked at me like I was just nuts, unfortunately. I'll admit. I had some great gains, and I took gains too soon and I just want to like, I don't want to talk about it, but we all do that. It's easy to do what you can at the exact moment with the data that you have. In hindsight, I didn't think the S&P would be near 4000. I didn't really think it would be 3000.
I'm not really good with pandemics and trading pandemics but because now, we know, buy every pandemic. Right now, yes, I'm hiding in consumer staples. I have a little gold exposure. I'm not a gold bull or bearer. Just I think I'm there, little silver exposure, slightly positive in those right now. I think the dollar can continue higher which I was telling Ash last time. I thought the dollar was going higher, and he looked at me like, we got to end this call.
I don't have any Bitcoin exposure. That's not something I trade. I do look at it on Hedge Fund Telemetry. I give opinions with buy and sell places and back when it was the $3,000, I hit the buy signal and I told people and they were like, what? Nobody really cared. Now, here it is. 50,000. It's pretty amazing.
JACK FARLEY: It's something to behold, Tom. You've mentioned that there's two battlegrounds in the market. One is with regards to the size of stocks. Mega cap stocks versus small cap stocks, I think we've covered that already, but another lens through which you look at the market, another battleground is reopening stocks versus stay at home stocks. Tell me, how are you seeing that battle evolve?
TOM THORNTON: The stay at home stocks, we all know the Zooms, the tech companies, Netflix, Roku, we watched all those do exceptionally well and even the reopening stocks or you have energy, you have retail, you have cruise lines, you have airlines, financials are in there as well. I'm looking at my Goldman Sachs thing here. The Goldman Sachs basket of stay at home was up 1.3% today and reopening was a little better at 1.7%. Everything went up today it seems.
Those have been titter- tottering around of what's working. It's almost too obvious that there's going to be a reopening. The problem I have is a lot of these stocks have already moved so much that they're pricing in just an unbelievable recovery. I look at Disney. Disney is a great company. I love Disney. I've been long, I've been short, I'm short currently, but the movie theaters aren't going to really have full capacity for quite a while, I'm looking forward to going into movies by the way.
Then Disneyland and Disney World and all the theme parks, I think Disneyland, they were talking 15% capacity and then maybe 25% and this is like towards the end of April. It's the perfect time to go if you can get tickets. Going 25% capacity would be just amazing and great experience, but it's going to cost a lot for them to reopen and run those parks again. They haven't really had the CapEx to pay all the people and run the parks.
I think that Disney is ahead of itself. It's clearly 30% higher than its peak back in January of 2020. If anything, there's a lot of stocks out there that just priced it in right now. Airlines, cruise lines, perhaps, TripAdvisor is up 50% higher than where it was in January of 2020. Everybody's going to want to travel. I'm taking three. I have three trips planned. We'll see how far those go, but there's still a little bit of a trade there. If those back off, I'll buy them.
JACK FARLEY: Tom, you mentioned that you have three trips planned, by any chance, are any of them to Miami, where I understand that things are heating up a lot.
TOM THORNTON: I'm not going to Miami. I live in Greenwich, Connecticut. I have a lot of people and friends in New York. I'm in Palm Beach and I'm moving to Miami, and they've just given up. I'm going to Dallas to visit my daughter at SMU, and Los Angeles to see some friends and clients. Then what's my next one, oh, Charleston to see another daughter. They're just subtle little trips but not Miami, and boy, what a mess with the spring break last week. Yeah, that was really something else to see in those videos.
JACK FARLEY: It really was. It makes me think some in the market are just foaming at the mouth bullish for reopening stocks like Disney, like airlines, and others are more cautious. It sounds you're more in that second camp. But tell me, on the topic of Disney, that just makes me think that it's neither fish nor fowl because now, it's a reopening stock because it has Disneyland and the like, but during the pandemic, investors who were bulls could say, oh actually, it's a stay at home stock because of Disney Plus. How are you thinking about those stocks that don't really fit in either category and it can't be put in those boxes, like it's easy to put a cruise liner or another stock?
TOM THORNTON: Well, one thing about Disney and I used to be a media trader as well way back when in my hedge fund, the stocks are not cheap right here. There are times where Disney's really a good value and then there's times where it's very expensive. It's expensive right now. Disney Plus, their subscriber numbers were great. I actually got Disney Plus because I'm on Verizon FIOS and they gave it to me for free. So, I count as a subscriber. It was a big ramp up. We'll see how well it does. I'm sure it'll do fine, but the subscriber growth will probably moderate somewhat as well. I went back to Disney, but what were you saying?
JACK FARLEY: Well, actually, you mentioned that you're a media trader. I just actually think that that shows your competence and skill as a trader because as someone who works in the media, the media typically is a tough business to be in. Moving on, Tom, let's talk about bonds. As the 10-year has been rising, that's been putting a lot of pressure on these growthy names. Tesla comes to mind, Tesla was down today as the 10-year gapped up about two basis points of I think 1.66, and Tesla was down about 3%, 4%. How are you thinking, will rising bond yields continue to rattle technology stocks, what's your outlook?
TOM THORNTON: My outlook on bonds has been that they are for sale. I've been bearish on bonds. I've thought yields would continue to go up. They reached about 1.75 on the 10-year which was