Investors Are Out of Position — And That Is Supporting the Indexes
Why being wrong-footed makes for a market that is harder to knock down. Plus, the most underappreciated development this week.
Tech-Led Rally Lifts S&P 500 To Best Day Since Early August
Stocks and bonds rallied together Thursday after having fallen in unison the day before following a hawkish Fed decision, helped by oil prices easing back for a second day.
Calm Action Attracts Investors as Fed Fears Subside
The bounce off the quick fall on Federal Reserve Chair Kevin Warsh helped calm emotion.
Things I Did Today
Here are today’s things:
* I shorted the indices:
$SPY $761.34
$QQQ $714.29
* I shorted more $JOET at $44.94 and $GRNY at $27.65.
* I added to $GTBIF at $7.40 and $MSOS at $4.92 longs.
* Liquidated $GLD at $398.35.
Position: Long MSOS common (VL) and calls (S); Short SPY (S), QQQ (S), JOET (S), GRNY (S)
SPY, QQQ Moves
With S&P futures +97 handles and Nasdaq futures +465 handles, I am putting on my next tranche of Index shorts:
* SPY ($SPY) $763.84
* QQQ ($QQQ) $716.72
I continue to scale on strength.
My objective is to be medium sized on any further rally.
Positions: Short SPY S QQQ S
Adding to Index Shorts
Added to Index shorts:
* SPY ($SPY) $760.52
* QQQ ($QQQ) $712.71
Positions: Short SPY S QQQ S
Trading the Market That I Face
Yesterday we covered all our short index exposure into weakness.
I am reacting to the robust rally from yesterday afternoon’s swoon (and changing risk ranges).
With S&P futures +64 handles and Nasdaq +323 handles I have re-shorted the indices (very small):
* $SPY $760.73
* $QQQ $712.55
Given the momentum-based, algo-dominated market (“buyers buy strength and sell weakness”), I plan to give Mr. Market a wider berth on my scaling into a larger position.
In other words, I am trading in the market that I face, not the market that I want!
I am confronting the previously mentioned machines with technology (and fractal analysis) (h/t Hedgeye) and risk management/discipline.
Position: Short SPY (VS), QQQ (VS)
Things I Did Today
Here are today’s things:
* Near the morning lows I covered my (common) Index shorts:
$SPY $758.42
$QQQ $702.06
* On the rally I reshorted SPY at $761.84, covered some SPY puts and sold some more SPY calls short.
* Near the morning lows I covered some $GRNY at $27.32 and $JOET at $44.97.
* I added to $MSOS long at $4.71.
Position: Long MSOS common (VL), calls (S); Short SPY common (S), calls (M), puts (VS), GRNY (VS), JOET (VS)
Messy Market Action Continues But 2 Big-Cap Names Stand Out
Your best move right now is to focus on trends, not turns.
Oscillator and Index Shorts Update
The S&P Short Range Oscillator remains oversold at -4.32% vs. -4.85%.
At 5:13 AM I covered all my index (common) shorts given the -60 handle drop in S&P futures and -550 decline in Nasdaq futures:
* $SPY $758.25 (-$6)
* $QQQ $701.76 (-$13)
I remain net short SPY — through short SPY calls and short SPY puts.
Position: Short SPY calls (M) and puts (S)