BULL DAZE

So, I was able to unload my $NQ_F long for +70 this morning, and its helped me to navigate some ups and downs in the remaining swings I have on.

All week the $RUT has been a leader of lower prices. That can’t be ignored.

Off the gap and fail this morning, we’ve taken out yesterday’s balance area. If prices are unable to recover through this zone, start shorting rallies in the near term until the divergences signal change.

Both stocks and bonds are lower today, so I think today’s close in stocks is critical. If using the $SPX, north of 1986-88 area is preferred if you’re riding the bull case.

And likely marked a top with this post. I picked up some $NQ_F at 4259 this morning, as well as $VRX calls and $BCEI and $EYES stock. Yesterday I started a $SQQQ hedge around these prices and also bought $BABA and $AMBA calls.

Trading conditions are the best I’ve seen in a long time, and the lack of conversation and activity out there makes me think this could be the norm for awhile.

What’s on your radar today?

Lots of questions circulating about Gold lately. Last post I wrote was about my sentiment change in where I think Gold is going, but I think the bottom is in. This has more to do with watching those around me buy high and sell low, and the change in sentiment recently. As mentioned in that post, I inherited a sweet Gold coin collection at the lows.

I would absolutely avoid buying gold up here. In fact, I would prefer to short it. I want to bring back the analogue we used for most asset classes back in the 98-99 era. Here’s a look at Gold prices back then, after a long bear market in the metal.

Another view up close…

After a two month rally in Gold, prices slowly drifted back down towards their lows.

Here’s a look at the current price action. A similar descending range that broke to the downside, then sharply rallied back up and out.

After a similar rally in 1999, prices slowly drifted lower for the next several months while everyone scrambled to buy dips.

I had originally stated back in 2013 that I thought $950 was in the cards. Now, if I see $1100 again, I’d nibble.

OA

The best tell in the last few weeks to milk the long side of the market has been the constant relative strength in small caps. Even on days where the market has been red, small caps would be in their own world, trending higher.

Today, they’ve been a leader to the downside. It’s been weeks since we’ve seen such behavior. Along with this, my market timing indicator hit overbought yesterday. This has been a fairly accurate indicator of marking tops, or the start of trading ranges.

We’ve got another intra-day divergence here where tech is trying to rally, but small caps aren’t moving. If this continues, it makes the NASDAQ an easy short here.

UPDATE: Just put on an $NQ_F short here at 4298.5, with a tight stop.

OA

The breadth expansion in this market has been nothing short of remarkable. These types of signals are what you see when longer term downtrends transition to longer term uptrends.

I’m off to the best start I’ve had since 2014, and have been playing this all fairly cautious. The absence of sellers has made it easy to hold out for some pretty big movements out there.

I wanted to touch base real quick this morning, letting my After Hours with Option Addict crew know that of the watchlist these are the names on my radar: $BOFI, $OUTR, $AIG, $HZNP

Reminder, I am still out of town and there is no After Hours with Option Addict webinar tonight. We’ll meet tomorrow.

OA

Today is a day of pause. Lately the relative strength in small caps each day has been a pretty good indication that this rally has fuel left in the tank. Aside from the frantic accumulation in materials and energy lately, it seems that riskier stocks have been bid. The laggards, high short interest, even some trash stocks have been starting to perk up. That’s usually a sign that the rally is getting a little frothy.

I made out like a bandit this week, and am watching carefully for divergences to turn. $TLT’s are bid, $HYG has paused, carry trade is north of 113, banks are holding up well, oil flat/up, no sell extremes, and small caps leading today. It still feels early, but I am hoping for a gap up in the market next week in which the divergences go negative to help determine when to lighten longs and hedge up a bit.

I took $LNKD this am, and will probably buy a bit more to average the time decay. As for the market, I’m just listening here, waiting for the right signs.

OA