The Keystone Speculator's Stock Picks and Pans for 2020

Here is a list of stock ideas clanging around in Keystone’s empty noggin. Of course, any trade always depends on the minute, hourly and daily chart patterns, indicators and behaviors as well as other factors. Perform your own due diligence and ask advice from your money manager before placing any trade.

Keystone’s 2020 Predictions, an annual write-up, or perhaps more correctly a dissertation on the markets and economy, including political and societal impacts and insights, is lengthy so a Reader’s Digest version of the stock ideas and picks follows.

Very simply, stocks go up on central banker money-printing, and then stocks sell off when the easy money dries up. As stocks become soggy and start to drop, one of the four central banker horsemen of the Apocalypse, the Fed, BOJ, ECB or PBOC, rides in to save the day pumping asset prices higher with promises of never-ending dovish accommodation.

The upside rally in the stock market continues as long as the market participants maintain full faith and confidence in the Federal Reserve and other global central banks. The end game occurs when confidence is lost in these modern-day money God’s in charge of the Holy Financial Temple. The Federal Reserve goofed-up bigtime in December 2018 with a rate hike that exacerbated the ongoing Q4 2018 market crash. Chairman Powell performed a pirouette as 2019 began promising easy money for as far as the eye can see and stocks went to the moon. Traders did not care that the Fed is clueless, they only care in the ever-expanding money supply which is the Mother’s milk of higher stock prices.

Keystone is very negative on the stock market this year, however, this is based on investors losing faith in the Fed and other central banks. The central banks will keep printing money until the cow’s come home; they are a one-trick pony. This year the dovish pump may continue but stocks may not print new highs which will begin spooking participants.

Or, wages may roll over which would expose the Fed’s 11-year Keynesian financial experiment as a failure (except of course for the fact that all the money-printing has made the wealthy privileged class, that own huge stock portfolios, filthy rich beyond their wildest dreams). Inflation, that the Fed and other central banks have tried to create for over one-decade, cannot exist without wages rising. If earnings roll over this year, the Fed has blatantly failed. Fed members do not care, however, since they will be rewarded for their dovish loyalty to the Wall Street investment banks with lucrative speaking engagements once they leave public office. This is how the crony capitalism game is played.

The description of the trading year qualifies as a glass half-empty. Such gloomy forecasts will not get you invited to many parties. If stocks roll over and die, obviously, the index ETF’s will all be attractive short plays (or the short index ETF’s will be long plays). You can still take a drink out of a half-empty glass.

All sectors are expected to be lower at the end of the year than where they are at now except for the XOP which may eek out a sideways to sideways higher path. The monthly charts are topping out with negative divergence across all indicators warning that a very important, and perhaps epic, stock market top is at hand; a multi-month and multi-many-year top. The Fed and other central banks will be key this year in determining if another stick save occurs, or, if the whole shooting match is flushed down the toilet.

The following ETF’s are topping-out right now and can be shorted going forward throughout the year; XLU, XHB, ITB, RTH, XLY, XLI, XLB, XLRE.

The following ETF’s are topping-out but they need one more jog move (down-up) on a monthly basis so they will peak in the February-April period and can be shorted from there forward throughout the year; XLK, XSD, SMH, XLP (tech, chips and staples will peak after the broad market).

Sector-wise, XOP is the only one that hints at a sideways to sideways higher bias this year. Perhaps this can be viewed as a defensive play; a place to park money during the projected 2020 craziness.

Keystone is negative on the multi-year high-flying stocks that created the bulk of the broad market gains over the last decade. Here are some ideas to begin the year. Consider all the tickers mentioned in this post to be a shopping list where you can take an idea or few and do your own research.

The following tickers are potential shorts in 2020;

AAPL short from Feb-Apr forward (AAPL, GOOGL and MSFT will be the last three to top-out)
FB short from here forward
GOOGL short from Feb-Apr forward (AAPL, GOOGL and MSFT will be the last three to top-out)

MSFT short from Feb-Apr forward (AAPL, GOOGL and MSFT will be the last three to top-out)

INTC short

MA short

V short

VZ short

T short

CMCSA short

PG short

KO short

MRK short from Feb-Apr forward

SBUX short from 96 and higher throughout the year

LOW short

DIS short from 152 and higher

WMT short

TGT short from Feb-Mar forward

TSLA short from March-May forward

PALL short from March-ish but verify with charts

FMC short but watch to see if it potentially tags 120 first

Short the homebuilders including KBH, DHI, LEN, NVR, VNQ, XLRE

Homebuilders PHM and TOL will top-out in Feb-Apr so short them from there forward

ODFL short

WERN short

Uniform providers CTAS and UNF short this year which hints at gloom for manufacturing and healthcare industries.

Tower companies AMT and CCI are shorts this year

The following tickers are potential longs in 2020;

GE is a long play this year with an attractive C&H pattern that targets 14.5 in the summer, perhaps view it as a defensive position.

AAL long but only from 23-25 if it prints

APRN on long side early in the year

TLRY long

MJ long now, but then price will relax back, then a long from February forward

ZYNE may be a speculative lottery ticket play on the long side this year

RIOT long

KODK buy dips early in year for further highs

PAAS buy dips early in year for further highs but stay away from March-April forward

MGPHF long

DBA long

JJG long

SSG long (2x leveraged ETF against chips so be careful)

SRS long (2x leveraged ETF against real estate so be careful)

BECN may hang in there sideways this year, perhaps view it as a defensive play.

GPRO may bump along sideways this year, perhaps view it as a defensive play.

LB should prancy sideways to sideways higher this year, perhaps a sexy defensive play.

VNM long

EWW long, should move sideways to sideways higher this year

EWZ long only for Q1 into Q2, get out before H2 and even short it in back half of year

Portuguese stocks may provide long opportunities or at least move sideways

Concerning all the tickers mentioned above, Keystone currently owns JJG, MGPHF, RIOT and SSG long and is short utilities via the thinly traded SDP. The positions are constantly changing. Keystone will be playing most of the ideas mentioned above as the year plays out.

If all of the above makes your head spin and sounds like a bunch of mumbo-jumbo, simply follow Keystone’s proprietary algorithm, Keybot the Quant, which oscillates from long to short, and back again, using ETF’s, travelling through the trading year with the smoothest path possible. Keybot may whipsaw here and there but overall, the quant always tell you the status of the broad stock market long or short at any point in time.

Since this is a long-term stock market top at hand, multi-month and likely multi-year, and especially if you are a long-term investor, scale-out of your longs and scale-into short positions over the Q1 period. Only keep long positions that you plan to hold a very long time such as 5 or 10 years since this top which is likely in Q1, perhaps some stocks peaking in Q2, will likely be an epic and historic top and the central banks may be unable to save the day this time.

There are always lots of opportunities no matter what market. If the Fed or other central banks start pumping like madmen again flapping dovish wings, the short side will not play out as expected; stocks will all rally again like last year. If confidence is lost in the central banks this year, global markets will crash.

The only wild card with the picks above (the short calls) is the Fed and other central banks. Can they print money forever or do they reach their denouement this year?