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Let’s talk markets and direction here. The DJIA has just had such a hard time getting away from 18,000 on either the up or the downside for months on end now. There are pockets of strength from Disney to Apple to Ambarella to Facebook that have taken those stocks to new all-time highs even as the broader markets have struggled.
Feet to fire, the path of least resistance for this market for the near-term is probably lower. There’s building angst amongst the traders and investors who are getting itchy trigger fingers as the markets flounder here. Most traders and investors aren’t stock pickers, so they’ve missed benefitting from owning some of those individual stocks that are at all-time highs — and their frustration is building. Frustration from bulls seems now to be about to evolve into fear from the bulls and that would turn them into sellers and we’ll likely see some high-beta stocks down 10-20% in the next few weeks if that’s how this market ends up playing out.
I keep coming back to the Biotech stock bubble and the IBB ETF in particular as a way to further hedge our overall portfolio of mostly long positioning. I’ve got the XLF puts on my sheets already as a recent hedge and I am going to add one small tranche of some biotech IBB puts dated out into June or so with strikes around $120 or so.
Remember that these IBB puts are mostly hedges, and that I’m not actively looking to time the top of the Biotech stock market bubble or anything like that, at least not yet.
And remember what I wrote yesterday when I talked about how I’d like to have an opportunity to get more aggressive in buying more of our longs and maybe even some call options at some point if the markets were to tank near-term. We might get that chance sooner rather than later.