HOUSE KEEPING

We’ve been talking about the market leveling off soon and taking a breath.

@RyanDetrick offers great market stats via Twitter, and posted this seasonality chart for the month of November, going back to 1950.

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The first week of November was a smash, but things typically die down for the next few weeks before rallying into Thanksgiving.

Again, this has no bearing to why we made $6 per share in $NK this week, but it may be good to know if you are holding market correlated instruments.

Participants are still looking for action here, which should make trading breakouts and such a pretty fun gig for the next few weeks.

I am booking a few things today, and have bought up some $X calls.

More later,

OA

TODAY WAS A GOOD DAY

I’ve made more this week than I have an any single month in the last few years. I’ve been trying hard to keep the balance hidden, but days like this you have to look.

Holy shit.

The QQQ’s were the first to hit the 52 week high mark this week. The SPY is within fifty cents.

What about the market hitting overhead supply? Trapped longs?

Non-existent when you factor in the breadth readings over the last year. Like most have pointed out, smart money sold earlier this year. Why? There wasn’t shit worth trading. Now that the market presented an entry point, that cash was deployed. And there was more cash (as a percentage) readily available now than there has been in the last 20 years.

It would be one thing if that “supply” represented trapped buyers. Any indicators will illustrate distribution in the summer range. Not accumulation.

Now that we’re here, let me ask you, is this “frothy?” Is this “enthusiasm?”

You have to consider much more than price when answering that question, because I am still blown away at those that are not participating in this, or even worse, are fighting this. That’s why the market keeps trading higher. It will continue to do so til morale improves, lol.

I’m done with that argument though. Sincerely. Take it elsewhere. The heavy lifting was done back at the lows, where it needed to be. I’ll point out individual ideas from here, but you can have your market analysis back. I no longer require it.

OA

FOUND ANOTHER EASY TARGET

Oil Trolls. This was an epic sentiment experiment. We flagged this at the lows in crude.

Oil prices EXPLODED the following day, paused, and are EXPLODING higher yet again.

We knew this was a crowded short, as too many people reengaged the short into the hole, or bought into Goldman’s $20 Oil Headline.

This is an interesting move, especially into API this week.

Anyone got a take here on oil?

 

 

LET ME SHOW YOU SOMETHING

This is that point where the market quiets down. But the funny thing is, my stocks are exploding.

We no longer require “the market” to facilitate profits in stocks. The speed is gone, and correlations have been boot stomped to multi-year lows.

What does this mean? You have a better chance of producing a gain in a stock, than you do in any market correlated instruments.

This is why I claimed yesterday that you would make a lot of money into year end. For the first time in a long time, we’ve entered back into a market of stocks, rather than a stock market.

Start looking around at stuff that has lagged the rally a little bit, as we’re seeing further confirmation of rotation here today.

Top picks?

OA BUY: $ZIOP

Picked up some December calls in $ZIOP, which comes high a top Goldman’s Asshole Stock List.

29% of the float is short, fwiw.

More later,

OA

FIMO INFLOWS

You gotta review the important matters of MISSING OUT, as I discussed throughout this overall process. Starting from the lows of September:

FOMO.- Fear of Missing Out

MIMO.- Maybe I Missed Out

FIMO. – F*@#, I Missed Out

What do you do with free cash on the first of the month? Apparently, you buy stocks.

I’m giddy here with the choices that were made today in terms of stock selection. This is exactly what I laid out at the Investor Conference in NYC.

A rotation in risk.

See, the fears are starting to diminish here. That’s powerful. This is the main thing we’ll talk about in After Hours with Option Addict today.

YOU ARE GOING TO MAKE AN INSANE AMOUNT OF MONEY FOR THE HOLIDAYS.

OA

MY MAIN SQUEEZE

As I mentioned in After Hours with Option Addict last week, I am a Shanghai bull here in the near term. I think there is about 400 points of upside remaining this year. Suffice it to say, I’ve got some exposure here.

Lately, we’ve been talking about high short interest names, “dash for trash,” etc. While we are clearly seeing a risk rotation in the market today, you must look at the high short interest stocks as a place to get the biggest bang for the buck.

So many of these heavily shorted stocks have not moved during the first phase of the rally. But then again, the higher this thing goes, the easier it becomes to shake these stocks down, simply for the reaction.

I’m looking at $QUNR. Last week the stock got a downgrade and spiked on heavy volume. Today its down about 10%, on a small fraction of that same volume. This is one of the most heavily shorted China names on my list, and its trying hard to consolidate some pretty fast moves from last week.

This is purely a spec play, but it has the potential to see some pretty fast upside.

Trying some Nov calls, fwiw. Any additional downside from here, I like it a lot less.

What are some of your top squeeze candidates?

CASH IS KING?

You do realize the extent of this rally falls not totally on the macro or fundamental argument, but mostly on exposure, sentiment, and positioning, right?

Do you understand why the correlation to 1998 (which has the highest correlation coefficient I’ve seen) was not hinged so much on what went on in the world at the time, but how people felt about the world, and what they did with their money in response?

The best indicator I’ve used during the whole process here? Cash.

We spoke of this a few months back, but the Global FMS Cash Indicator hit an EXTREME this year. That means that there was more cash available to be deployed if the opportunity presented itself.

BAML cash

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What if high cash levels were waiting for a market dislocation to present an opportunity, rather than to predict a crash?

I’ve posted my arguments on many occasions that this is simply what is happening. This is why you are seeing late 90’s price action in some big name stocks too.

The higher this market goes, the greater the need to deploy that cash, a la 1998.

The reason the charts have such a high correlation? Price is a reflection of behavior.

Forget the similar headlines. Pay attention to the behavior.

I gotta tell you, today’s action is the most constructive part of the last 6 weeks of analysis. The arguments are about to grow very quiet around here.

OA

LOOKS LIKE ROTATION

Stocks have a pretty good trend here off the open, but notice that the non-stop trending stocks over the last few weeks are not the stocks hitting days highs here. In other words, there are new names trending with the market here today.

As I mentioned a few times last week, I don’t care much about what the market does this week, I’m mostly concerned with which stocks get bid up this week.

I started up some $CRM and $JOY right at the open off this weeks watchlist. Will be paying attention to top dollar movers today to notice any themes.

More later,

OA

ALL I WANT FOR CHRISTMAS IS A DRONE

I was at my sons 3rd grade football game last month and heard this noise I couldn’t locate. Finally, I looked up, and sitting still in the sky was a drone, taking video footage of the football game.

Immediately after seeing that, I wanted one. I can scout hunting spots this winter, spy on my neighbors, check on traffic, etc. Anyway, its the number one item on my list this year.

I’ve also been a long time fan of Shark Tank. This show got very little play when it first debuted in 2009. I fell in love with it, because it helped to illustrate entrepreneuralism and the American dream at a time when most people were down. It’s the only series I watch on prime time, and I’ve watched every episode.

If you missed it, there was an episode recently on a couple of guys with a drone company, looking to raise some money. Business Insider did a write up here. Also, here’s the video.

It was the most memorable episode I’ve watched. This company makes drones, one in particular that takes your phone with it as it flies. The sharks got into a bidding war, which ultimately doubled the valuation these guys were looking for, and each shark got in on the deal.

A few names that I follow as drone or drone derivative plays are $INVN, $IXYS, $AVAV and $AMBA. 3 of these 4 have been trading very well lately, and I wanted to start piecing together a position in $AMBA here around $50.

Overall these stocks were high flyers in late 2013 to early 2014. $AMBA traded on their own path to a degree.

Anyway, this is what prompted me to start nibbling into a falling knife. $AMBA has already seen some fear and panic priced in this year, but I’m a buyer down to $45. I would have gone with $INVN, but I can’t get it under $10 anymore. I plan to hold for some time.

Have a good weekend,

OA

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