If you are looking for stocks to rally here, don’t be the guy that runs out to buy the stock that nobody else wants to buy here.
I have to pull a quote from last Wednesday, to discuss my thoughts on the market…
In terms of the McClellan, we are not yet oversold. But here is how this usually pans out. We’ve likely seen the session lows for the day. At the same time, I doubt we see any real bullish reversal here. However, if we gap down tomorrow, and remain above 1634 in the $SPX, I am going to be a big buyer into that set-up. Those days where the market is down and the McClellan is oversold, there will usually be a divergence that takes place. Usually, it will be in Copper, the Russell, or the VIX. This means market down, but one of those three instruments is providing another signal. In every “correction” like this, that is the playbook in almost every event. Go back and look. Days where the market was down, McClellan below -80, either the Russell was up/flat, the VIX was lower than a prior high, or Copper was green that day.
Here is a quick check of that divergence…
Into Friday’s sell-off, the S&P clearly took out its recent lows, while the Russell did not. In fact, neither did Copper. The VIX did take out its highs, but in terms of my divergence, 2 out of 3 signals we called out on Wednesday were right as the McClellan signaled oversold (-80 or lower). 
While it’s great to see this set-up multiple days before it happens, what’s more important is knowing what move to make from here. Yes, upside risks outweigh downside risks at this point, but don’t rush out to buy the same garbage we were buying over the last few weeks. The cycle of risk has been reset to a degree. When investors get a little rattled, they reset their risk appetite by looking for quality names. Look at an intraday chart of IBM. Check INTC, MRK, etc.
Aside from my play in SODA, I don’t see a lot of garbage stocks leading the market here. In other words, don’t line up to buy them. No one else is.
Disclaimer: I grabbed some AAPL calls just above 446 this morning.
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Good post, Old Sport!
That tag will never get old.
Do you still like Wlt and Deck?
I am in both, and like DECK.
More importantly…always ask yourself if YOU still like WLT and DECK.
So you think over all market keep rallying? Thanks!
I am very constructive on this market. I will post a video tonight explaining.
Thanks OA. I will wait tonight’s post!!
I am trying to get used to your posting style. Do you still hold STV? Do you normally post your exits like Fly does? Thanks in advance!
I sold it. Posted in the chat here.
Make sure to read the blog comments daily for entry/exit prices.
fifty52- Option Addict offers an advisory, providing more information, as do the iBC PPT and 12631 services.
Good call on P
I told you last week this market was going down as you were loading up on garbage small caps.
I sold them. Booked massive gains. You also ragged on my SODA trade, which worked, no?
Heckle elsewhere dude. You don’t belong.
Since when do you have to try to pick the top to make money in the market? Also, since when is buying calls on a stock like SODA before it makes a +10% gain (When the option makes like 300%) a bad thing?
Hit the road Fly jr. I just rocked 300% gains in my SODA. (Great call OA!)
Are your eyebrows still intact?
Thanks for all your work and for showing us what you have learned over all your years of experience.
We’ve all seen the sector rotation chart, but that’s mostly for an entire 10yr or so business cycle, this obviously is shorter term shifting… Do you have any sort of guidelines for staying ahead of the curve on the risk Cycle?
Beta from 0-.75, then .75 to 1.25 then 1.25-1.75 then above 2, and so on until finally diving into the stocks under $10 small caps and OTC Lotto plays?
Or is it more about a rotation of perceived “quality” Blue Chips, dividend names and Value, then midcaps and GARP, Then High flying new highs on high growth, then biotech and high PEG, Then Small Caps and negative earnings and high short interest short squeezes, and finally bankrupt stocks and “lotto”?
Maybe a little bit of Both? Kind of just thinking out loud but would like your input too.
Thanks again.
Risk cycle,
My comments are not aimed so much at the long term sector rotation cycle, but more towards investor sentiment and appetite for risk cycle. This is what enables me to pick stocks out of a hat, magician like.
I am going to post a link to a video tonight. It is an hour long, but just watch the first half. This is a copy of a daily recording I do in my trading room everyday…but the things discussed might help tie your questions together.
OA
Awesome, looking forward to it.
strike on the aapl calls??
460
OA, appreciate the guidance on RBCN. It was a big winner for me.
And it was a perfect trade too.
Maybe a little early, but right entry, exact target, right leverage.
Great work Woj.