Weekly Watchlist

Markets look prime to rally into year end. A little over a month ago, we discussed the possibility of the market chopping around into December expiry, then moving higher into year end. With today’s big rally, I’m now certain of it.

December expiry was bittersweet. I had a good number of positions expire worthless, but am thrilled that our move into Marijuana stocks two months back helped to offset some losses. This week, I took on a few more Crypto stock plays, which have been starting to really move lately.

I also have a list of stocks I fancy going into next month, which you can find here.

The last few weeks I’ve been outlining my market predictions and forecasts for 2018. I’m getting really excited for the New Year, and in terms of how we analyze stocks, we’re going to adapt to a rotational/top down style of analysis during our midday discussions. This won’t change how we find great setups, but from what I’ve gathered, I think it will make a tremendous difference in the timing of big group/sector swings.

We’ve got a good week setting up starting Monday, so enjoy the weekend and be ready and refreshed for some great moves next week.

 

 

A Look On The Lower Time Frame

When I warned that the markets would start the week with a gap up, and not to chase into that gap, I felt like we’d find buyers below.

Despite failed strength to start the week, here’s how the trend continues to develop on the lower time frame…

$SPX Lower Time Frame

$SPX Lower Time Frame

We’ve found a little footing mid-week, which is what I had in mind.

It’s important to note that tech stocks… mainly F.A.N.G and the momentum crowd, rolled a few days ahead of the indices.

This is the fourth time since the election that this has happened. Each time it has, the Trump Trade has heated up. Those stocks include banks, materials, infrastructure, small caps, credit, etc. This rotation has lasted about a month (give or take) on each of these last occurrences.

I spent the day developing a watchlist for next week. Here’s the list.

 

 

FINDING FAITH IN FRIDAY FEAR

I love a little Friday volatility. It leaves participants feeling fear and doubt going into a weekend, and in many instances over the year it’s morphed into a pain trade of higher prices.

I think the best way to articulate my thoughts about how we closed the week is to let you listen in to a video presentation I gave earlier today, after the market abruptly sold off.

In this video I compared the week to former market rotations that have occurred since the election…addressed market speed and correlation…and talked about sentiment extremes or lack thereof.


Market dynamics are always subject to change, but I have always broken the environment down into a few simple concepts and conditions…all of which remain in tact.

Here are a list of my favorite setups going into next week

Have a great weekend!

Jeff

I’M BACK

I took a short leave of absence from the blogosphere – and it was everything I thought it would be.

I started blogging about 12 years ago. I built up a nice little corner of the internet where I could discuss ideas, make predictions and accusations, and help others become better at trading. I miss that part of it and have opted to make blogging great again by posting my thoughts here throughout the week.

I made some major life changes over the last year – been through hell and back. I’ve grown more as a person and a trader in the last year than I have in my career. I’ve learned new things, and can articulate better about what you need to know and apply in this game to be better at it.

Like I’ve always said…“I can be a friend to you.”

Don’t Miss This Video


In this video recorded yesterday, I go deep. The reason I post this, is it’s a good refresher of cause and reasoning as to why I thought the market would end up as it is and how things are evolving around it.

I also touch on various other items – so you can get a little analysis around a few different topics.

Let’s discuss – leave your comments

Looking forward to re-establishing blogging as part of my routine and conversing with you in the comments again. Drop a comment below.

 

I WAS HAPPY TO BE A FRIEND TO YOU

As many of you know or have heard recently, I have been in the process of moving back into money management. As I’ve said on many occasions, the industry is in need of guys that have a legitimate skill set at this sport, and while the last 5 years has washed out all the pikers, frauds, and even triggered the departure of some of the best in the business…the opportunity now for the next generation of professionals here is more valuable than I can ever recall.

Mom and pop have given up on stocks. We’ve watched a tidal wave of money leave active management for passive management, specifically in index and ETF products. This suggests that the crowd has dumped the idea of beating the index. I cannot be convinced otherwise that this presents a generational opportunity for stock pickers and for years I have been waiting for the right timing to make this move.

In the last few weeks, I realized that this will require a significant amount of my time – and that I had to reduce my day to day work load. Therefore, I spoke with Fly last week and we’ve decided that I will step down from my blogging role here at iBC.

iBC was the only trading blog I’ve ever read. Started back in 2006 when it was Fly Buys and Rap music. I almost partnered with Fly back in 2008 but opted to start Trading Addicts instead. When we spoke again in 2013, I was thrilled to come on and participate. I opted to shut my blog down in 2008, despite having similar traffic to iBC back in those years. I liked writing about trading and being in front of big moves. I also enjoyed teaching, helping others and developing a core of like minded individuals looking to offer the same value. For many years, I felt I was able to do that here. When the model of blogging stocks and setups had become questionable, I had to hold my ground. I feel that while the cycle of retail interest had reached its lowest levels of interest in my lifetime, that this was the time to build upon a foundation and be in the position to be the go-to spot for the next generation and for years to come. I’m happy to see that come back to this site. It was the core of its value.

Thank you to my readers, first and foremost. I won’t vanish forever. I’ve always been easy to find. For those of you who are interested in investing with me, feel free to email me. I’ve already raised the bulk of what I plan to manage, but I did mention I would give folks a chance to participate if they wanted to. You can email me at jeff@tradingaddicts.com

For members of After Hours with Option Addict, we will still continue with the service. The model might change a bit, but I will still work with that group. We’re still trying to determine what the last Boot Camp may or may not look like, but I honestly don’t have that decided yet. So please stay tuned for details.

Thanks to my man RC, Raul, Dan and other bloggers of the site. I really enjoyed working with you all.

Big thanks to Fly. I respect nobody in this business, but do respect you and what we’ve accomplished. I appreciate your hospitality, the ups and downs and the friendship. Thanks for offering a corner of your site and for promoting my skill set.

My best to all,

Option Addict

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.

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