Trade Alert: Taking profits on some index puts
It’s sure gotten a bit panicky out there today as the Russell 2000 small cap index makes new lows today. The Nasdaq, S&P 500 and the DJIA are all just about 1-3% away from their intraday lows in October. There are probably a lot of algorithms and traders out there waiting to sell and/or short stocks if the major indices breach those lows, so expect at least one more whoosh down if they do.
Meanwhile, the battles being waged in The Great Trade War of the 21st Century are heating up and just as I’d noted Wednesday night when the news hit, we can not downplay the significance of the arrest of the “CFO” of China’s big tech company, Huawei. Do you not think that executives at Cisco or Intel are wondering if they just might be putting their own freedom at risk the next time they go on a business trip to China? Huawei is China’s Cisco/Samsung/Nokia rolled into one giant tech company controlled by the Communist Party. And we just had Canada arrest their CFO while she was changing planes in Canada.
On the other hand, here’s a bullish anecdote at least. I just got a text from one of the many permabears who have missed the entire Bubble Blowing Bull Market, whom I hadn’t heard from in years.
Feet to fire prediction — the markets bounce 2-3% here from this afternoon’s panicky levels. And then maybe they do finally go below the recent lows and bring out one big panicky capitulation whoosh down that actually serves as a bottomish level for the markets into year-end and early next year.
As for a playbook, I’m going to sell 1/3 of my QQQ and SPY puts here. Holding the rest. And if you haven’t nibbled any of the Revolution Investing long-term stocks that you’ve been thinking about, it’s probably a good time to nibble a bit here. But there’s still more risk to this cycle and corporate earnings and casualties from The Great Trade War of the 21st Century and what not — that I wouldn’t try to load up here. Remember back in 2011-2014 when I’d even buy some call options during panicky sell-offs like today’s action coming after this week’s whoosh down? This isn’t 2011-2014. Maybe nibble. Don’t be greedy. Don’t be scared.
