READY TO PUT THE “POOR” BACK INTO POORTFOLIO

It’s about that time of year again. This is where guys make a dash for trash into year end.

I’ve been pondering the question…what stocks would I catagorize as trash, dog shit, poor man’s treasure, etc.

I’m compiling a list as we speak. My time frame is long enough to ensure your holiday stockings are chock full o’ shit.

A few early thoughts….$P, $TWTR, $TRIP, $ACIA, $MEET, $TWLO.

Have some others you care to share?

Criteria…

– not so much as an uptick in 2017

– the kind of stock that makes you almost throw up in your mouth

DOLLAR SHORTS NOT BUDGING INTO STRENGTH

Watching this unfold is literally the same as it was back at the end of 2016, just from a “standing on your head” perspective. In fact, the chart of the $UUP looks remarkably similar.Allow me to demonstrate.

Figure 1: EOY $UUP Rotated Upside Down (lol)

Figure 2: $UUP

On this recent push higher, the short position hasn’t budged at all, which could create a fast move if I’m correct about the turn.To recap, I’ve been talking about a turn in the dollar happening. However, it’s obviously in the early stages of this turn. It’s a crowded position as it was last year. Yet, rather than take a Dollar long, I went Gold short…which has performed quite well thus far under minimal dollar upside. Should the $USD breakout, Gold prices will find floorboards quickly. This still goes down as the most memorable bull trap I’ve seen in years.If you want an upside down chart of $GLD during the same time frame, gimme a holler.

LOOKING FOR A NEW NARRATIVE

On a monthly basis, I try to have one core narrative or belief to focus my efforts on. Here’s my last few months of core blog discussions…

Short Gold (full position completed 9/5) – “many trade gold… few understand it” – most insulting comment I received in response to that idea BTW. Check

Semiconductors set to BTFO (8/21) – Check

China Stocks (many trades through July) – Check

My biggest prediction to buy Trump/Materials/Inflation trade after Q1 Beat down back in May looking amazing as well. Check

I’ve been quiet lately because I am thinking. Participation is up, the excitement in the market is on the uptick, and I still believe the case for a fast move up exists. I’m not bearish yet by any means, but I am watching the crowd carefully here.

I missed an opportunity to blog about an energy pain trade about a month ago, so no need to start that discussion this late into the move.

I’m leaning toward my general market theme for October as calling it “Stocktober.” I think there’s a good chance that everything moves higher together, and makes a good move at that.

I’ll discuss this more in the coming days, but I see no separation within the market to look for a micro-situation to focus on. I’d be thinking macro here.

A PORTFOLIO FIXTURE THAT’S STARTING TO SHINE

Lately the trade(s) that we’ve centered conversation around these last couple weeks have been on my call for dollar strength. Here’s where it all started…

End of last year, this was the most crowded trade in financial markets. Long Dollars. If you attended my Boot Camps last year, this was my macro call for 2017…short the dollar. I bought Euros back in December.

The big breakout in the dollar in December quickly lost its momentum and has been spiraling lower all year. Now, it’s become the second most crowded short out there. My play this time around was to short Gold, which conversely got a little heavy last week. Thus far, this has been one of the most memorable bull-traps I’ve watched play out in quite some time.

I also took the opportunity to play a bond short via TBT at $33.23 and bought $WFC calls under $50 as well as some $BOFI calls at $25.

The response to this conversation in each instrument has been pretty solid. While the dollar hasn’t turned much at all yet, I suspect these instrument will catch fire quickly as the boat starts to capsize.

The market has taken on a much healthier rally than most of what we’ve seen this year. It’s been an insane week for the swing trades and with each day that passes, it seems that things look even better. I’m still in awe of how many set-ups are still out there. Slow indices and fast stocks still continues to be the market theme for the foreseeable future.

THE BOAT HAS TAKEN ON MORE PASSENGERS

I suppose a congrats is in order. After years and years of downward spiraling sentiment, Intelligent Investors-R-US are now slowly starting to believe the market will be higher 6 months from now.

I specifically remember saying in 2015 that “regardless of your opinion of the state of this market, it is going to forcefully drag you higher until you have no choice but to change your opinions.” I’m surprised it’s now more than 2 years later and we’ve got our highest reading of bulls for the year.

Good timing, friends.

Also, this is the most bearish market development I’ve seen all year.

KNOW YOUR OPPONENT

Aside from myself, a few well respected traders/technicians came out last week to discuss the price action in Gold.

To summarize, those opinions were similar to mine stating that the only folks buying last week were of the retail variety. When you sense this crowd, or can see their footprints in the market…prepare to take their money.

I’ve stated this about the overall market, and the same can be applied to any instrument….when the pain trade becomes ‘lower’ it is because the market has left people stranded above. We discussed this at length last year, referencing the island of longs in both Gold and Bonds around this time last year. Today, prices gapped beneath all prices printed last week. In other words, late longs are now trapped – as I suggested in the gruesome comment exchanges last week.

As discussed in After Hours with Option Addict last week, I used the enthusiasm of Gold bulls to also initiate a LT position in $TBT and a few trades in a few banks. The timing of last week I felt was significant – and was why I built these positions leading into last week.

I’m still a little underwater in my $DGLD, but that happens when you build a position into a breakout or breakdown. I like my chances here.

GOLD GAPS HIGHER – THERE’S A SHISTORM BREWING

This morning I am humbled by this explosive move in Gold prices. As my alarm went off this morning, I knew I would have to face the music.

There would be feces cast about, comments made about family members and the size of genetalia….this I would have to endure being positioned against a highly sophisticated crowd of hamburger flippers, Walmart greeters, convenience store clerks and custodial arts workers.

Do your worst. Today I am prepared for all things.

lol.

LAST TRANCHE OF $DGLD, PHIL’D

Despite the furious “Post-urbation” in my comments section over the weekend by a simple Silver-ton named Phil, I picked up my last tranche of DGLD, as planned, into this Gold breakout.

Doomed might I be, but I like the vocal opposition from the gifted’s POV.

Avg cost is in the $42’s.

THE PAIN OF POPULAR OPINION

Yesterday’s AAII sentiment results shows the second highest tally of bears for the year at just shy of 40%. This is what I call the popcorn set-up.

As I’ve always said, happy to bet against pessimism and fear every day of the week.

With the FANG, Biotech and Semiconductor set-ups all in sync, hard to see much downside until we get a fast move higher.

Hope your week was as good as mine.

OA

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