As the probabilities suggested, the first significant dip of this 2.5 month rally in stocks was bought ravenously like a pack of wolves seeing fresh red meat for the first time in a week. I expect there to be a flattening out near the previous highs around SPX 2815. Hedge funds are slowly creeping back into the stock market to keep up with the averages, and are were probably the ones buying that dip last week. Since the hedge funds were so underinvested for most of this rally, they weren't going to pass up on a chance to buy that dip. Which is why the SPX shot up like a cannon off of 2725. That was just last Friday, and now 3 trading days later, we're back to 2810. That is a fast move that will get more investors bulled up and willing to buy the next dip.
With each successive dip, the funds will have less dry powder to put to work and eventually this up trend should finally change to a down trend. It is often a gradual process, so if you short too early, you will feel pain and probably won't be able to hang on for the ride back down.
Currently there are a couple of things that need to happen before I go on bear raid.
1. The stock buyback blackout period needs to begin, and it is about 2 weeks away.
2. SPX needs to stay above 2800 but below 2850. If it is below 2800, I am not getting the ideal entry and could get shaken out on a short term rally. Above 2850, and the topping process will be lengthened for at least another few weeks.
3. Risk parity has to stop working, and need to see bonds selloff when stocks rally. So far this year, bonds have been able to stay well bid even when stocks go up. This is the least important of the things I need to see, but it is a factor.
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27 comments:
Are you anticipating a bear market or just a deep correction and if so to what level?
Anticipating a US recession within 2 years and a bear market during that time. If earnings get hit enough, the stock buybacks will disappear and you could see SPX 2100 easily.
You mean 2100 this during this coming buyback blackout period? That sounds pretty extreme.
Long another 15 QQQ 175 June puts at 4.91
Sold SINA at 58.20
No, of coirse not s buyback blackout period, Iam talking within 2 years. By next month, perhaps down to 2710.
Don't like the selling action. Sold all QQQ Puts. The previous ATH will either be a double top or a left shoulder.
Ol dawg
at 5.02
Short 1000 MO @ 56.77
Short 1000 DOMO @ 40.92
Covered MO at 56.70. Shorted 1000 more DOMO @ 41.57
covered DOMO 43.98
Long 50 contracts QQQ June 182 puts @ 5.65
Sold QQQ puts 5.57
Long CTL Oct 12 calls @ 1.37
fawked up bigtime by selling the puts. Convinced myself last night that we are going to at the very least touch the old highs. But in reality I think we going to 3300 if not more. Why? Why not. Accomodative fed and an election year coming up. They gonna prop this up. They may even cut rates and expand the balance sheet. Then after the election it's gonna be like Obamas second term. People are going to be like we got low rates that increase the valuations but my numerator cash flows are shrinking. Let's sell. Prepare for new highs. Ol Dawg School of Economics.
Sold CTL 1.15
Long AAL June 31 calls 2.29
Sold AAL calls at 3.92
Long DAL June 57.50 puts at 2.85
sold DAL puts 3.055
Long CTL Oct 12 calls @ 1.47 1/2 size
Long NKTR July 35 calls at 3.72
4.72
Long QTT at 9.25
Sold QTT at 9.28
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