STRENGTH IN SMALLS

Small caps are behaving quite differently today. Divergent from the downside action this morning. That’s usually a good tell at this stage of the game.

Seems like #FANGBANGING here is the sport of choice from what I gather across the internets, but here’s a quick list of longs and shorts I like from here:

Longs: $USG, $VDSI, $FLML, $GPRO, $PAH, $POT

Shorts: $W, $GRUB, $MNST, $TWX, $MDLZ

For those that attended the open house, would love to read any feedback you have here in the comments section.

More later,

OA

We kick off our February Boot Camp tonight at 7PM ET. Here’s the link to sign up.

You’ll receive an email with instructions to register and attend. Once you have registered, you’ll log into the link provided at 7PM ET tonight to attend live. All sessions will be recorded if you are unable to attend. The recordings will be emailed at the conclusion of the events.

The schedule is as follows:

Last week we talked about carrying a bullish bias til we hit 1940 on the $SPX. We’re here now, but I am finding less reasons to be worried about these prices this morning.

Here’s the positives: Financials are participating, $HYG back up to $78, Carry trade positive, momentum leading, breadth extreme positive.

Negative: $NYMO +85, Russell diverging a little intraday here on this last push higher.

I am short ES here at 1940, and am close to hitting my stop. There’s not much out there yet to support this bias other than what’s been pointed out. That October analogue, if it continues to work could perhaps push us closer to 1960 before stalling out and trading back down to 1940.

What’s incredibly tough here is that all the stocks the market wanted have not slowed down to let anyone on. Finding good bullish set-ups has never been this tough. Don’t waste to much time on laggards. The action in some stocks reminds me of late 2014.

As a reminder, I am out of the office today. After Hours with Option Addict will resume on Monday. Don’t forget, Boot Camp starts on Monday as well. Hope to see you all there.

Have a great weekend

OA

In light of the recent market context, these morning probes lower are very interesting. There’s no real substance behind the selling, and no speed. I often refer to it as “smoke screen.” Such criteria were things we watched very carefully during the same market action in September leading into October.

I favor the long here until 1940 is reached.

Still like all things materials here, and am watching $N very carefully today for a quick long.

What’s on your radar?

Several weeks ago, I was asked to pick out a chart that looked like ass. Something that would plummet should the market head lower. My pick was Wayfair $W.

Not long after, the stock shit the bed to the tune of about -36%. On this recent rally, I think it looks good for another quick attack on the short side, should the market start to roll over.

The retest of a range break like this is always a great spot to initiate.