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

Added second batch of $DGLD

Back in 2015, I talked a lot about the various asset correlations to 1998. Specific to the dollar, that pattern/correlation helped us bet against the dollar in Dec 2016 via an $FXE long.

Here, we are close to the bottom for the greenback. That said, I thought that Gold would be my best bet to play this… especially considering the headlines.

I still have one more batch to buy in $DGLD, but have enough on now to get rolling.

CASE MADE FOR A FAST MOVE UP

Last night’s After Hours with Option Addict is worth a watch. I haven’t spoke market talk in quite some time, as I was under the opinion it was totally fucking irrelevant…but yesterday after the bell I made the case for a fast move higher starting this week. In the last few days, I have been getting hit with unsolicited market analysis…or forwarded articles of the doom variety…so I pitched my case for why the market makes it’s fastest move up for the year starting into yesterday’s weakness.

FANG stocks all rallied off support, semiconductors are set to BTFO, and biotech stocks had the looks for a breakout…all of which happened today.

An important note we discussed was that the anxiousness in volatility indicators was not being presented in the market action. Meaning, people were starting to price in downside but market speed has all but deteriorated.

The market weakness you want no part of starts from a fast move up. Til that happens, I’m content to headline with “staying the course” til I the anxious ones are no longer anxious.

 

SEMICONDUCTOR INDEX SETTING UP SOMETHING SPECIAL

The volatility contraction in the Semiconductor index seems to be setting up for a very big upward directional move.

These stocks are important. They’re early cycle of course, and they are the group that signaled market higher back in early 2016.

The above range signals a 10% move that will happen fairly quickly when triggered. This is why I’ve been stacking these stocks in my portfolio the last couple weeks.

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