August 23, 2024

What an interesting 48 hours it has been!

A top to bottom ~2% move on the QQQ on Thursday, and now this move back up today. As of the close for 8/23/24, SPX is 5634.61

Talk about a whipsaw. We saw some real selling yesterday, and today we closed higher than both Thursday and Wednesday. Most importantly, as I read William O’Neil would say about eager market participants: buyers felt confident enough to hold onto their positions into the weekend. A real showing of strength.

We are neutral on the Fear and Greed index by CNN.

I believe the graphical plotting is better to view this data. We appear to have dipped down (sub 25) to hit 'Extreme Fear', just as we did in October 2023. We all remember what a tremendous rally occurred afterwards. 

In my experience, such a big portion of individuals wrongly positioned after such a big rally has negative consequences for those incorrectly positioned, sort of like a perverse feedback loop. Those who shorted, still believe they are right but early, and those who shorted and now believe they are wrong are waiting for their opportune moment. While those who went risk-on and went long (as myself) took profits way too early. I believe this only just fuels the rally, as individuals like myself will look to buy any dips within standard deviations or touching the Bollinger bands.

Did I buy yesterday? You bet I did! It was just what I was looking for on 8/21/24, and mentioned that we were expecting and betting (higher probabilities) for a move down, and we saw it.  Around a 2% move from top to bottom for the Qs, and knowing Jerome Powell will not stray from his mandate and thinking it seemed like a sale was going on. Powell signaled that the time has come to cut interest rates. The market reacted accordingly with IWM up around 3% and VNQ (real estate) up around 2% ; both very rate sensitive markets, market participants voted with their hard-earned dollar today. 

See below:

Earlier I mentioned that the put/call ratio is very low and another trader (The_Short_Bear) also noted this, it was at .47. Now, let's see what happened, it went from .47 to .74 ; this is about a 57% increase in a matter of days! Exactly what I wanted to see when deciding to get risk-on. Many once again mispositioned for the upside today, causing a massive rally. 

Positions that are standing out: 

CAVA (Massive earnings move, nearly 20% up today.)

SG (Sympathy play from CAVA earnings.)

TEM (Recent IPO, I am seeing the lock-up period ends in 12/24, need to verify this.)

AMZN/CRM/WMT (As long as the consumer survives this storm and we get some decent economic headwinds they both should do well)

ZETA (SAS company)

Stay safe friends!

Disclaimer: Please note that all information shared here is for informational purposes only and not intended as financial advice.