In 2020 the Nasdaq 100 was the leader. After the election, and with the market looking ahead towards more fiscal stimulus and the "reopening", the Russell 2000 has become the leader. The driver of short term price moves, the fast money, are overweight the Russell 2000 and underweight the big caps. They are overweight speculative and cyclical stocks, and underweight low beta and defensive stocks.
The Russell 2000 still looks strong, it has tripled the upside of the SPX since the January 29 low. But a little bit of a change in character has happened since Wednesday. The Russell 2000 has lagged the last 2 days.
Nothing to be too worried about now, but something to keep an eye on because Russell 2000 is now the leader, and a lagging Russell 2000 is a signal of buying saturation among the fast money crowd. That is when the market becomes vulnerable to sudden flush down moves.
It is too late to buy, and a bit too early to short. If I see the Russell 2000 continue to lag even as the SPX is going up, that will get me more interested in putting on a short position. 2 days of lagging performance in a flat market isn't much of a sell signal. I need to see more, and preferably lagging RUT while the SPX is going up, not down. When markets sell off, the Russell 2000 will almost always underperform the SPX. So I need to see RUT lag when markets are flat or going higher.
Still not getting much of a signal from the bond market either. And Powell is a chirping dove, which was confirmed this week. Powell has been completely neutered by the market. He is an eunuch. He will not change his tune easily, so that makes it tough to play for anything more than short term pullbacks on the short side.
Past bear markets and waterfall declines (except 2020) were all preceded by Fed rate increases (1929, 1973-1974, 1987, 2000, 2007, 2018). So you've got to be aware that you probably aren't going to get a bear market until Powell signals tapering.
Put/call ratios are grinding lower, but as I've mentioned before on Twitter, retail call buyers are skewing ratios much lower, and they are not drivers of overall market direction, so you have to normalize for that. Low put/call ratios will not give you a big warning signal anymore unless that persist for several days near 52 week lows. This week is a start, but need to see more of it next week.
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Thinking 235 to 238 on the IWM.
Long MOMO calls since $16.
Tendies to the moon diamond hands gamma squeeze rocket emoji X 3
Dude you should get rid of that old school 1990's mentality and get with the new school. Retail does drive the market. Believe it or not there are a lot of fund managers who didn't trade during the mortgage crisis and definitely during the dotcom boom. They trade a lot based on social media trends. I learned a lot from reading WSB/Reddit lately about crowd psychology. Sure the game is still the same, but the elements have changed the color of the game. The moves are different and more pronounced because of retail and because of social media combined with retail. We have more and more gen z, millenial, and average joes trading now more than ever thanks to the pork. Sure many of them are going to bk, but lot of them got hooked and will be here to stay. This ain't Jesse Livermore's market anymore. That's why these old guys like PTJ don't do as well lately as these young guns.
Retail can move individual stocks, of course, except the truly big caps like AAPL, AMZN, etc. But they don’t move the overall market. Retail is piling into these speculative stocks because they keep going up, But these type of explosive super speculative markets are not markets that have durability. Anyway, you better make as much as you can while longs are doing well because its seems like you are not really into short selling.
Oh I'm into short selling. But the economic model doesn't support it. But it's good to swing both ways. You can't just fade these retail reddit guys because theres too many of them. You have to learn to go long these spec trades. Look at TLRY and GME many. Many multiples of 100% to be made there going long. Can only make 100% tops going short and the liquidity doesn't support the pump and dump as much nowadays. Not saying they don't exist.
But let's face it the fade trade, the reversals plain simply don't work anymore because of reddit traders and more importantly these algos program traders. When retail isn't chasing momentum, we have quants sitting on bids and offers piling on once side back and forth to trap movements.
Yes, if Biden keeps pushing out more stimulus until Dems lose Senate in 2022, then the economic model for short selling will be broken. He probably gets 2 more stimulus bills passed and then market is on its own. Once economy starts heating up in 2nd half, Powell will have fewer excuses to keep pumping stocks, although considering how horrible he is, he might just do a Bernanke and keep pumping just for fun.
At the end of the day, we all know most of the strongest stocks this year are trash with no long term prospects for making money. Lots of supply has been made and more will be coming as SPACs are endless and those blank checks will be used to by new trash for insiders to cash out and dump on the public. When the dust settles, you will have a mountain of hot garbage cooling off as demand drops off with stimulus all done.
As the market kept going up from Trump till the beginning of Covid, there were many many many stocks left for dead that had shit dumped charts. Now even these left for dead stocks have been pumped lately. That's a sign of a bubble. Same thing should play out in the next bubble. Market concentrates on a few leaders like Faang with the most market cap until the tide rises all ships.
There should be a great shorting opportunity on lot of these pumped stocks with bad financials. But the borrowing cost is too high and the put premiums too high.
Anyways stocks spend more time going up then going down. Obviously if you can only see the short side of any trade you are missing out on more than 50% of the profits.
It confuses me greatly why anyone would only think short when the meat is mostly on the long side. You have to learn to play offense and defense. Defense doesn't win games without high powered scoring.
Ageee borrowing costs is a big negative for shorting most of these junky stocks, but now there are so many stocks without much of a borrowing cost worth shorting for the long term (TSLA being one of them) it isn’t that hard to find them to hold long term shorts.
Made most of my money on the long side in 2020. All of my money in 2021 has been made going long. I like going long on pullbacks, just don’t like going long after a big run higher.
So definitely willing to play offense if the probabilities are high. Just the nature of the market is that of a steady move higher and then a sudden plunge out of nowhere (see Feb 2020, June 2020, Sep 2020). That makes it dangerous to chase after a long rally.
That's a mental block I realized. Just try it. You'll always make more money getting long stocks that are going up then lose money from buying the top. Because the odds of something that is in motion going the way it is in motion is always greater than the odds of going the other way.
It's a mental block and a mental asphyxiation. To think that something that is very high must go down to a lower level or something that went down real low needs to come back up.
This is hero syndrome, skeptical syndrome. It's batting down the nail that sticks out syndrome.
The fact is something that does well, continues to do well and something that does poorly continues to do poorly.
This is the right way to think and something that all traders should learn to do. Adding the contrarian play is okay from time to time.
Try getting long SMH calls. You know it's going to 280. Just add a little bit of capital. Once you make money on it, it will change your way of thinking about stocks and indexes.
Indices/ETFs trade differently than individual stocks. Individual stocks do tend to trade with more momentum and follow the trend often but indices are less reliable for trend following, Most trend following funds prformance are poor in the long term,
Bond acting very weak lately, one of the first signs of potential cracks in the stock market rally. If SPX gets to 3990 this week, I’m shorting.
Getting long bonds anytime soon? TLT at 145
Out of the MOMO. Market feels weak here. But... I have a hard time believing that was it and we go down from here.
But we'll see. Long June 75 TWTR Puts. Half size
Long AAL calls 17 June
Bonds getting to interesting levels. Will probably get long some time this week, usually a strong bounce when you get this oversold.
out the TWTR puts up a couple hundred bucks. Feel the time to short is not yet.
Feel we maybe range bound and then go up once the stimulus talks get closer. Waiting to add to the corona subsiding plays like AAL
How high do you think crude oil will go?
75 this year
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