I BOUGHT SOME STUFF

Last night in After Hours with Option Addict, we discussed a market setup coming into the day. Open up, ramp, sell-off.

That seems to have been what’s happened here today, and this dip, I bought.

Crude is breaking out here, breadth is awesome, and that ramp in the Russell out the open negated yesterday’s divergence. If that reads like stereo instructions to you, know that in this market action, I am well pleased.

Bought some more $COP, $AMBA, and $MBLY. Wanting to buy more $CMCM and $FTNT.

Booked gains in $BAH and about to book $TWTR.

Life is good.

OA BUY: $DB

I am buying this stock down here, where so many eyeballs have been bestowed upon it.

Long Nov 11 calls.

INITIATE PAIN SEQUENCE

Last weeks poll was a great tell about the environment out there. Even if you are/were bullish, many were heavy cash going into the Fed. The reaction you saw was fast, which provoked you to chase the market up into the weekend.

We start off the week with a gap. I love when this happens, because that is usually what activates a pain trade sequence.

My thoughts here are that those that chased the market up late last week are probably not feeling as great about this, and are potentially being stopped out or taking things off into this move lower. More importantly, this is forcing shorts to initiate lower…just like the last few times we did this.

This gap down happens to be a retest of last weeks balance in the indices, which is the retest one should buy. With as quiet as it is out there, not sure if this read is most accurate, but that’s what I am thinking. I don’t see bulls out there cheer leading this dip. In fact, those that are shopping seem cautious. Bears are most vocal here from what I can tell, and that’s always a layup.

Stalking $ADRO, $GME, $SOHU and $VMW today.

TOUGH YEAR…”POOR” MR.BILL

Pershing Square YTD returns as of 9/20/16. In a year where you can throw a dart and win, it’s unfortunate to see such under performance.

happydaypoorbillHedge funds in general haven’t trailed the market this bad since…

1998.

Maybe I’m right about this overall pain trade. T.I.N.A. Buy the stocks you sold last year for +20% higher prices and get it over with already.

 

STILL NO BULLS?

2016-09-22_10-43-44Between this and my poll this week, which showed a heavy cash position in the retail crowd, it’s lonely out here.

CHEER$

Stocks melt up for the win. Enjoy yourself.

READY FOR WHATEVER

Feel lucky here?

In events like this, I spend most of the day focusing on what being kicked in the balls feels like. This way, I am over-prepared for pain.

I picked up $YY and bought back into longer dated $FIT at the open this morning. $AAPL for a yolo too.

My other wishlist items include: $QRVO, $ADRO, $BNFT, $GME and $NUAN.

My cheapie lists are looking amazing here too. We may highlight these soon in After Hours.

Best to you and your parts.

OA

TOM LEE WARNS YOU TO BUY AGGRESSIVELY HERE

“Timely Tom” came out with a warning in late July about being scared of August. Stocks responded almost immediately…tomTom is out with a warning again, and he says you should “buy stocks aggressively. Tom has been one of few that has been right about this market all along. He states:

“We believe this 3% pullback NEEDS TO BE BOUGHT aggressively,” Lee wrote on Friday. Emphasis his.

Lee considers the simple history of stock price moves.

“Newton’s ‘law of motion’ applies to stocks in mid-September — 90% of time, if stocks up between 5% to 20%year-to-date (YTD), gains continue to year-end (YE),” Lee observed. “Since 1940, to gauge what stocks do between 9/15 and YE is simply look at YTD performance. When stocks are up 5% or better, they rally into YE 87% of the time (90% when between 5% and 20%). When stocks are down YTD (thru Sept), they historically show no further advance until YE.”

Tom Lee observes that stocks tend to rally into the end of years.
Tom Lee observes that stocks tend to rally into the end of years. (Image: FundStrat Global Advisors)

This line of reasoning may be a little oversimplified for most investors, especially considering the lineup of market-moving events going into the end of the year. It’s worth noting that Lee’s study found that the pattern he observed also held during election years.

Lee went further to consider fundamental and economic reasons why markets could rally from here.

“Why is this ‘law of motion’ at work?” Lee wrote. “We believe this law of motion is simply reflecting that whatever forces and factors drive YTD gains, are likely to remain in place into the end of the year. And we see this at work in 2016—(i) global search for carry; (ii) US economy remains on strong footing; (iii) underinvested investors (performance chase) and (iv) contrarian sentiment.”

Lee has 2,325 target for the S&P 500.

 

3 Day Workshop Next Week & How Markets Bottom At All-time Highs

I’m going to devote some serious time next week in my 3-part free webinar training workshop to ‘Gauging Market Sentiment.”

I should quote the latest work from FatPitch.
While actionable and quality information in or about the market is at an all time low, proper sentiment analysis and how I gauge chemistry of the market has been the most reliable guide I used to guarantee in the fall of 2015 that we’d trade to all time highs.

It’s a ‘group-think’ position to be on the sidelines here, and this isn’t how markets crash. Rather, this is how they melt higher.

A tailwind for this rally has been the bearish positioning of investors, with fund managers’ cash in February at the highest level since 2001. Similarly, their equity allocations in February had only been lower in mid-2011 and mid-2012, periods which were notable lows for equity prices during this bull market.

Remarkably, allocations to cash in September are as high as in February and allocations to equities are now even lower. Investors have jumped into the safety of bonds, with allocations rising to a 3 1/2 year high in June and July.  Overall, fund managers’ defensive positioning supports higher equity prices in the month(s) ahead.

Allocations to US equities had been near 8-year lows over the past year and half, during which the US outperformed most of the world. After rising the past two months, allocations fell again to underweight in September. Bearish sentiment remains a tailwind for US equities. European equity markets, which had been the consensus overweight and also the world’s worst performing region, are now underweighted relative to their long term mean.  Investors are chasing the world’s best performing region – emerging markets – which now have their highest overweight in 3 1/2 years.

baml-cashThis chart tells you we are bottoming, even though we are at all time highs. Let that sink in…

I respect the decision to wait it out and buy back in at the highs. If it weren’t for that, I wouldn’t have mapped this all out as well as I did last year when I said a big chase would be set off.

To take this a step further, I’ll take my most recent trade positioned around a very “one-sided” opinion that market participants had about Apple. I literally couldn’t find one optimistic opinion on $AAPL into earnings this last quarter. I bought a ton of calls ahead of earnings…

aapltrade2

When the calls above were closed, I rolled out to a second position which was held to the ultimate price target of $109.

aapltrade3

Naturally, the stock ripped higher. I didn’t start getting asked about $AAPL as a long til we got to the $108-$110 area, which is where I booked gains on my earnings trades. Going into their iphone event a couple weeks ago, everyone wanted to buy $AAPL into the event. Naturally, $AAPL sells off post event like it normally does. I waited until I stumbled across my first bearish comment here about $AAPL going “much lower.” That first comment I read came on the 8th. I loaded up on some calls there, and now $AAPL is angry. It’s seeking revenge on those that own too little. In fact, I posted that alert on Facebook the other day…

14364833_1278903315461591_6736912668229643542_n

Here’s a 10 year chart. The trend is already underway. This pattern in Apple has worked in nearly every stock, sector and industry we’ve found this year.

aaplbreak

Sentiment, working patterns, and ideas similar to this that I am stalking into year end will be covered in next weeks FREE webinar series. Literally, you can’t afford to miss it.

SIGN UP HERE TO ATTEND. IT’S FREE!

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