Trade Alert: What’s causing today’s reversal?

Don’t forget that we’ll do the Live Q&A tomorrow at 9am ET. Join me in the TWC Chat Room or hit reply to this email with your question.

Meanwhile, the markets have gotten hit pretty hard on a reversal from their new highs earlier this morning. Why? Probably, as I’d outlined on February 15:

“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?

1. A sell-the-news reaction: to a China trade deal.
2. Black Swan event like a major company being exposed for fraud ala Enron 2001, Nortel 2003 or Lehman 2007.
3. A break out of war.
4. 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).
5. 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.”

Cody back in real-time March 4. Now then, before we declare the near-term top “in” let’s see how long today’s reversal lasts.

Meanwhile (meta-meanwhile, anybody?), I’ve done some nibbling this morning on this weakness, putting some of the new money I got in to work. I nibbled a few names.

I’ve started building a starter position in UBNT and KEYS (I’ll send out more analysis about each of them later tomorrow).

I closed out all my MJ short.

I nibbled SPOT and some SQ.

And I bought some VZ call options with strike prices that are near the money and that are dated out into July. 

Be cool, be calm, be opportunistic.