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TMI Snapshot:  Cyclicals Sentiment Melts Up into Year-End, Impact Concentrated in Materials Sector

TMI Snapshots: Quantifying Relative Sector Sentiment in the Recent Rotation Via Text Mining

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Managing Director

Elan Gore

TMI Data Science

TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade & traditional media.  Our proprietary software, TMI Machine, is a text-mining platform designed with the buy-side & capital markets professional in mind, text-mining the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income & individual equities.  TMI provides custom leading indicators and systematic trading strategies, operating at the nexus of linguistics & statistics drawing on vast experience in investment banking and hedge fund settings in senior quantitative and fundamental roles.  

TMI Data Science was founded by Elan Gore, an award-winning Senior Global Basic Materials Equity Analyst & China Economist with 15 years of experience in North American hedge funds & institutional managers; and Alessandro Porrino, Ph.D., an Algorithmic Trading Analyst and Programmer with 10 years of front-office experience ranging from complex FX option pricing to auto-hedging strategies at Bank of America Merrill Lynch and Standard Chartered.  Mr. Gore holds an MBA in Finance from New York University Stern School of Business, and Mr. Porrino holds a Ph.D. in Systems Engineering from Brunel University London.

Cross Asset Strategy

Multiple Countries / Cross Asset Strategy

<ul>
<li>We saw cyclical &amp; value sentiment melt-up into year end with one last boost from the Georgia Blue Wave; but a tough COVID winter with new mobility restrictions appears to be putting the rotation on hold</li>
<li>Surprisingly, last week USD shorts increased to levels last seen in September, positioning for further progress on the rotation trade (with Biden stimulus the likely catalyst)</li>
<li>Timing of rotation jitters at the early innings of earnings season is unrelated to short-term cyclical earnings visibility, as cyclical sector revisions showed outstanding momentum going into Q4 reporting</li>
<li>Our cyclicals sentiment indicator has corrected from &gt;3x STDEV readings at year-end to neutral readings, with most of the correction taking place in the past 2 weeks</li>
<li>Absent broad negative momentum in associated thematic trades, this appears to be a pause rather than a decisive reversal</li>
</ul><div class="content-highlight"><p>TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tool text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. </p></div>


We saw cyclical &amp; value sentiment melt-up into year end with one last boost from the Georgia Blue Wave; but a tough COVID winter with new mobility restrictions appears to be putting the rotation on hold
Surprisingly, last week USD shorts increased to levels last seen in September, positioning for further progress on the rotation trade (with Biden stimulus the likely catalyst)
Timing of rotation jitters at the early innings of earnings season is unrelated to short-term cyclical earnings visibility, as cyclical sector revisions showed outstanding momentum going into Q4 reporting
Our cyclicals sentiment indicator has corrected from &gt;3x STDEV readings at year-end to neutral readings, with most of the correction taking place in the past 2 weeks
Absent broad negative momentum in associated thematic trades, this appears to be a pause rather than a decisive reversal
TMI Data Science utilizes Natural Language Processing to build custom leading indicators using unstructured data sourced from the global financial, trade &amp; traditional media. Our proprietary tool text-mines the global media to discern and quantify nuanced qualitative shifts in press coverage as they apply to macroeconomics, equity indexes/ETFs, commodities, currencies, fixed income &amp; individual equities. 

TMI Snapshot: Pullback in Rotation Trade on Mobility Restrictions, Just as USD Shorts Doubled Down