Friday Nov. 26th thoughts $LABU Ex-Oil CRYTO | Is it time to go shorty?
Substack and Free Trail members
No fear on $LABU trade- We have 10 Days of trading for this to ripen- Don’t fall in love with the stripper and think too much of a Friday Move. These mean almost NOTHING.
What has changed?
FEARS OF NEW COVID VARIANT coming out in EUROPE and South Africa with research stating that this type has more mutations and the newest research stating that it is more deadly and vaccine resistant.
What has happened today-
The DOW opened 900 points down, the SP500 down over 2% and the NASSY was down 1.5% at the open.
Crude Tumbled 6% and hasn’t sniffed a stop to that, this sent the GLOBAL ENERGY INDEX down to the lowest its been since March of this year. (Traders are concerned that the new variant will put potential limits on travel- thus reducing the demands for fuels.)
Crypto made 11% drop which was a HUGE surprise to me- Doesn’t this usually trade non-correlated to the market?
This news is stealing the spot light from “Black Friday” retail numbers and over all euphoria in post-holiday trading.
Remember that this is an Ugly trading day. It is also a FRIDAY- AS BULLS WE ALWAYS, ALWAYS, ALWAYS discount the impact of broad indices ON FRIDAYS.
…So what is the hypothesis?
Lets zoom out, take inventory, and figure out what is what…
ENERGY
I’m very proud of the fact that we decided to trade EX-oil this week (see post from this weeks game plan) - BULLISH for this and future baked in expected returns in the sector. We got out of the way and let the storm pass, with the expectation of future bright and sunny days.
BIOTECH
It would be a Lie to say that my heaviest trade of the year on $LABU is going well… IT IS NOT. But, when I get out of my trading chair, stand behind the desk and think… how would I coach someone to trade this very thing, I would still say this is the right trade. I am remaining convicted- and pause to make any decisions until Friday of next week. BULLISH
RATES
As I’ve preached from day on, about a decade ago, Rates WILL NOT climb fast enough to cause a true inflationary environment on capital market assets! Sadly, we will only feel inflation in the pocket books of consumers, home prices, fuel, and food. The FED only has one more lever to pull, and that is the very QE- (bond buying) that they recently decided to taper. The ONLY THING THE FED CAN DO to get out of this mess IS MAKE THE MARKET GO UP.
Never before have the FEDS balance sheet assets aligned in ETF and growth stocks to inflate themselves out of this mess. There is no other choice.
This is the main reason that I remain BULLISH and INVESTED for the next week. IF THE TREASURY POPPED UPWARD OVER THIS FLASH SALE AND VIX SPIKE- I would certainly take a Short position. (Rule #1 Follow the Fed)
SRTY
It is not a bad Idea to add SRTY- If you are underwater in some positions and having a hard time going with my hypothesis, remember that the market DOES NOT care about your basis. You are always free to sell any of your winners, or highest basis securities, or longest term option positions and turn on a SRTY hedge.
I’m holding firm and keeping a strong eye on the 10-20 year note, and the VIX for volatility. Is the the big drop. NO this is not. I expect positive bounces next week. The fear of another COVID will be shrugged off in DOMESTIC MARKETS.
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