A "tell" is an observable, consistent, unwitting behavior in reaction to a known stimulus. Which is a fancy way of stating something you already understand intuitively.
Examples: You try on a new, hot outfit to model for your partner. You twirl before them, asking for an opinion. The love of your life looks you over squinches up their nose almost, but not quite imperceptibly. "You look amazing, babe" they offer with what is intended to be a sincere tone but is in the same tone they use to compliment your mom. This is the love of your life. The words mean nothing compared to the signals given off by the Tells of tone and expression. You change.
Example Two (The Point): Three stocks, all dominant in their respective corners of the consumer world, all beaten down mercilessly. All three had what should have been, could have been and in a better tape would have been bullish catalysts over the weekend.
Best Buy, Dicks and Nike are all down over 20% in the last 2 months. They are companies of varying quality in terms of execution but Supply Chain positioning but they dominate consumer segments which have been beaten like Government Mules over the ever-changing battle with China and tariffs in general:
Over the weekend the White House signaled a tariff policy shift (change in leaning?) on electronics and chips imported from China. While there an immediate retracing on some aspects of the deal in regards to timing and exactly what was included two things were clear: Apple and other consumer electronic products reliant on Chinese made chips ("most of the stuff sold in Best Buy") were included.
Second, the shift on chips almost demanded the eventual inclusion of other sectors facing a near total supply chain freeze on goods shipped from abroad, which is close to everything. Specifically Nike and Dicks (~55% of all sporting goods come from China, not even including shoes) should have seen relief rallies on this step away from the Road of Maximum Pain.
And all three stocks did rally! For 2 or three minutes...
Best Buy was the clearest beneficiary of the news. The company loses huge from the Chinese trade war as almost everything it sells is impacted directly. No China deal, no supplies for Best Buy in about half the products. The other half (like the coming consoles from Nintendo and Sony) are just going to be delayed and/or see prices jacked.
Best Buy was up over 10% pre-market and sold off instantaneously. Dicks and Nike, which stand to benefit huge if/ when the White House goes the next logical step by offering relief to apparel and sporting goods as well as chips, barely popped at all.
Even as the markets rallied in general, these three stocks which should have benefitted didn't. It doesn't mean nothing has worked. But the price action is a Tell. These stocks all go much higher with an easing on tariffs (Maybe not Nike but we'll see). They didn't.
The fact that these are three very different companies facing the same specific catalyst is the point. It remains the case that a reckless trade war risks tipping us into a deep recession, fear of which what keeps people from buying "good news" on stocks like BBY, DKS and NKE. Nike and Best Buy shouldn't trade in perfect lockstep. The fact they are tells you as far as the market is concerned there's one issue facing the market and it's not getting fixed. I can wait.
Rory McIlroy, bursting into tears at the realization he wore floral shoes all weekend and Nike doesn't even have them in stock (and won't for the foreseeable future).
As for our overall positioning I'm long and have cash but I'm not chasing headlines or fizzling rallies. There are, however, a few stocks worth checking out and I've got a new trade! Here's a couple I'm watching...
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