What’s the hardest trade to make right now? Buying more? Shorting into the strength? The permabears keep growling but are they about to finally give up and mark a short term top? We can’t guess when that will finally happen. I’m reprinting my article from last Friday about what could end The Relentless Rally of 2019 at the bottom of this post.
I nibbled some more TWTR for the hedge fund today.
Meanwhile, I’m selling my AAOI for a loss after they reported a miss for the quarter and talked of cautious guidance too.
I’ll be in the office this weekend and will be writing up a long form analysis so stay tuned for that.
Amaris is home. Family love.
Will the relentless rally of 2019 ever relent? Certainly it will, but perhaps not until the bulls start feeling fully invested and the bears have capitulated. I’m not sure we’re quite at either point yet but I also wouldn’t jump all in and leverage up on the long side either.
What can end the relentless rally of 2019?
- A sell-the-news reaction: to a China trade deal.
- Black Swan event like a major company being exposed for fraud ala Enron 2001, Nortel 2003 or Lehman 2007.
- A break out of war.
- Sentiment gets extreme levels, perhaps as stocks get so extended that the bulls and day traders get wildly cocky and the bears/shorts finally give up (as noted above).
- Macro/algo systems decide something in the economic/market data don’t look so rosy any more and they push the markets down for “no apparent reason” all of a sudden, just one day out of the blue.
Perhaps #1 and #5 are the most likely near-term catalysts to end the relentless rally of 2019. Wouldn’t take another 3-5% in the stock markets to get sentiment pushing extreme levels too, methinks.
But the path of least resistance for the stock market for now remains higher, I suppose.
All that said…in the hedge fund, I’ve bought just a few QQQ and SMH puts and shorted a small amount of SMH (a semiconductor ETF) common to keep some hedge exposure on. But I’m obviously still quite net long and would probably be looking to buy some more of our existing names if the markets were to finally relent on the rally of 2019.
Amaris is still in the hospital in Albuquerque and I’m headed back up there once again this afternoon to be with her for the weekend. She’s pretty much healed up and, if all things go well this weekend, we’re scheduled to get her home on Tuesday next week. It’s been 50 days since my family has been at home together. We often joke at my house that “We don’t pooping for granted” after Amaris joined us. Hug your kids, kiss your partner and tonight when you’re going to bed, well, just don’t take any of it for granted.
That last part is really my main advice for you dear Trading With Cody subscribers as we head into the weekend.