August 6, 2024

Time to buy.

As I shared in June I was selling most of my positions and only had about 30-40% invested, SPX was around ~5500. I actually sold a significant portion once the presidential debate had occurred as I had feared of a potential event that may affect the US market.

Now, it is time to buy. Per analysts, Real-estate had a record number of money coming in last week ; long/short strategy HFs were both buyers last week ; retail sold an inordinate amount of equities. It’s almost a repeat of October 2023, and October 2022.

The only mystery I cannot resolve is the VIX and other similar contracts. The fears are the Japan trade unwinding, recession, and potential long-term war in the Middle-east. However, the amount the VIX went up and in this short amount of time suggests more, it suggests a potentially life-altering trajectory for us all, sort of like some sort of bat-virus spreading. Joking. But, some suggest this may show a potential bottom which is coming from Andrew Thrasher, which is where I pulled the chart below.

He is a great follow on Twitter, and always provides great insights.

Clearly we are near a bottom, (discounting that March 2020 event), however there is no need to be a hero here. Each scenario took time to go back up and revert to the mean, and numerous times we saw what technical analysts call, “double-bottom”.

So, what am I buying? Same as I bought before, my income inequality playbook (CAVA, SG, CMG, WMT, COST, ELF, PG), but now some recession+tech plays (NFLX, AMZN, MSFT, NVDA, META, CRM, NOW). One must be conservative with deployments, if we do get what occurred in March 2020, which is pretty awful, we have about another 22.6% more downside to go (just from eyeballing it, 3100 - signal occured to ~2400 ; 700/3100 = 22.6), which would leave us around 4,018 SPX as this signal appeared to come in on Friday.

Please note I am not buying that much SEMIs (only NVDA, just because it is NVDA), if we do have a recession I don’t see how hardware will continue to do well, which if you look at INTC or DELL recently, the market seems to agree. However, I do see many buying SEMIs and calling for SEMIs to rally after this bottom; that could very well happen, but as of now I don’t see it probabilistically happening and so I am not going to tilt my portfolio to mainly SEMIs (AVGO, ASML, AMD). For example, SMCI - reported earnings and closed the AH session -13.28%, after being up over +10%. I don’t see us at max production of devices or products that use SEMIs during a recession. I may be wrong, but I rather be wrong and potentially lose fictional/imaginary money; then be wrong and lose a lot of real money.

Finally, I’m looking at 4967, and 5018 as potential stopping points; below that, buckle up we are in for a rough ride.

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