And also got out of JPM here. Sold the March 110 for 6.30 (bought at 3.06) and covered the March 115c short for .68 (sold at .53) That's 6.83 in credits against 3.74 in debits. +83% Also, I bet this drops into close to the 115 area.
Lightening up on all my positions in preparation for a likely softening into close. Just bringing risk back into line with original amounts risked...which means selling off the majority of the positions. Needless to say, it's been a stellar week.
I picked up some Mar $155 puts on CAT for 3.35. I doubt we'll see many big buyers today, and the bears should be done licking their wounds for the week and back to search for more. Translation: selloff into close and likely to hold early Monday before buyers step in mid to late afternoon.
Well, wrapping up the 2/9 positions now. Just have a few hanging out there. Added to the AAPL calls, picked up some Friday SQ $48 calls for 0.35 (I've played this game before!). Bought a few more FB puts. But other than that, holding course. Tomorrow will be the day of truth. If bullishness holds, I'll pick up some more calls. Buying into the close seems pretty good. An observation of today, most stocks are down, but those that are up have more aggregate volume. Note the sector rotation: Semis > (Nasdaq) > Tech > Finance > (SPX) > Industrials > Consumer Defensive. Textbook bullish consolidation. Market rips tomorrow.
Well, this didn't hold so: It's time to exit today. Closed out NVDA, AAPL, and XOM positions today as well as FB puts. Pretty savage day overall (but nothing compared to the run into today). Picked up some puts on COST. Still holding puts on CAT and have calls on SQ, CSX, and NFLX still open. As far as I'm concerned, correction recovery is over.
Ah right. Finally got the signal to get back into credit spreads this week. Been playing long volatility since December and this week was the week to pay the piper--was very much a volatility crush for me and not a pretty one. I'm going to be legging-in to these today because the 3-4% of the spread I can pick up doing that vastly improves the strategy's expectation. So, that will make live calls damn near impossible, but I do have a pretty good idea of what I'll be hitting this afternoon (I'll also be buying into close, particularly for the QQQ / SPX hedge). My targets are, NVDA (245-247.50); MSFT (93-94); CSX (56-57); FB (180-182.5); INTC (50-51); QCOM (59-60)... a few others. I'll be shorting the puts first, then buying the further OTM during the late day rally (which I fully expect. I try not to get too sideways when legging in like this--but it can be a wild mid-day ride. Also, short the MSFT $94p from .97 (probably the only live call we get today).
When confronted with evidence that does not conform to our hypothesis, we are left with two choices: Discard the evidence or discard the hypothesis. While the latter has fallen out of favor in recent years, it is still the one I subscribe to. So, time to admit I was wrong and just go flat for the weekend. I'm still bruised and bloodied from a pretty nasty week here, so it's hurting to take any swings, more so swings for the fences. Time to clean out some of that ugly looking red in my account and just admit this week is shot and try to improve my psychological state going into next week. Got out of the MSFT position at 1.05--so not terrible. Fortunately, it kept my margin in check all day and kept me out of other positions.
Catching that EOD weakness in that circle was a very much needed boost to the self esteem after so many blown trades this week.
As of today I have a bearish slant on the market. I'm thinking this is long term and The Big One...I'll explain next time I post, but I think today showed what the perfect storm to end this bubble will be. I'm still awaiting confirmation tomorrow or next week and I'm pretty light on everything right now and ready to turn on a dime. My radar is on high alert for the end of the bull party right now....tomorrow shall tell.
This post was a big one for me because it's the first time during my ET tenure that I'm long term bearish. Well, today did tell and it was a very loud confirmation. Prior to this week, I'd noticed a few changes in the market--most notably, my ATH earnings trades were not panning out when I used earnings based valuations. Not a strange thing in it's own right, but that did represent a shift from prior earnings seasons where the trades worked out well and regularly. But I didn't think too much of that in the backdrop of the January climb. My radar was high when the market continued upwards, and EPS started diverging from prior levels in spite of earnings that were less enthusiastically received. The take away from all this is that the market now perceives we are at the high end of earnings based valuations and they'll be coming down. The correction came on 2/2, and I posted live in here where I picked up the pieces on 2/9. And volatility never went away thereafter. This is, at least initially, something scary to me. So, I've been very skeptical of bull signs. When we failed to break out of the SPX flag pattern between 3/9 and 3/19, I took that as further concern for the health of the bull market. Yesterday broke out of the flag pattern the other way and held the lows into close. The Cambridge Analytica / FB / targeted ads news has been dribbling out all week, and a light went off for me yesterday. This is likely the catalyst that brings the common sense argument to why earnings based valuations shouldn't be this high. People knew the mortgage backed securities had problems in 2006 and the housing bubble continued on until mortgage companies started defaulting catalyzing the response. People knew in 1998 (actually "irrational exuberance" was late '96) that the tech bubble had no earnings behind it and no basis for the lofty valuations. And even in the mid 1920s people knew that the leverage was out of control. But it wasn't until something brought these things to a head that the market reacted and did so violently. I'd would suggest that fake news / targeted adds / election interference all occupies the same sphere as mortgage/housing bubble, tech bubble, and suspicions of banks (and leverage) in the 1920s...you might call each a 'zeitgeist'. What I realized yesterday is that there's a fundamental risk that the targeted ads carry in the context of concerns over media credibility and election integrity. My take away from Cambridge Analytica is that the arrangement with Facebook (an apparent blatant breach of the privacy policy--at least as any common user would understand it) was ordinary. I suspect we'll see similar disclosures of these types of arrangements from other companies in the coming days. And also, this is the kind of thing that, when coupled with the zeitgeist of fake news and elections could lead to congressional action against certain data collection policies. This is going to lead to a series of questions in the minds of investors along the lines of (all rhetorical, but all relevant): Will congress pass laws limiting the data collection of internet users, or add teeth behind largely unenforceable privacy policies? Will these regulations decrease the inherent value of advertising and bring it back on par with TV? What does this mean for the bottom lines of companies like GOOG, TWTR, FB? Will KO / TGT / AMZN revenues suffer because of limits to targeted marketing? Will V / MC / SQ transaction volumes suffer because of these limits? Will JPM or GS throughput suffer either in handling transactions or ownership of the stocks? Will limits to data collection result in a large reduction in data storage needs? Will this filter through to chips and server real estate companies? This is something that has potential to most sectors of the economy and is at the forefront of everyone's mind--which may well translate into political will. Given that just GOOG, AMZN, and FB account for 6% of the SPX, and each has an earnings valuation predicated on continued growth of targeted advertising, a small threat to it could have massive market implications. And, I'll note that something like BA didn't get hit so hard today, nor did industrials genearlly, nor did oil and gas and basic materials--sectors not really dependent on targeted advertising to consumers. And never mind the potential for political scandal in the current environment--nor its ability to influence the paradigm I've described above. It feels like Mueller is due to drop another bombshell in the next week or so, and the flurry of activity around the blast site suggests this might be the big one. So as of now, I'm collared up on my investing positions, and my trading account is solidly bearish. I note the SPX is resting on its MA200, with the previous low of 2531 perilously close, and the psychologically damaging 2500 not far beneath. It's tough to see how we could recover the January highs if we breach those levels if news regarding data collection practices and political uncertainty drops the same time. And to lighten the mood for anyone who tried to go long today, here's a little schadenfreude--one of my trades from today: