Newsletter - 8/27/2023
Time to focus.
The next four months are going to be perhaps the most meaningful months we've seen.
- ENVX news
- Blowoff top
- The move down
- Banks and CRE
Lots of actionable datapoints are going to be coming at us and that's without any black swans.
So, the summer is over and its time to pivot fully to what we do best - discover trade ideas, learn, teach and make money.
PREVIOUS WEEK THIS AND THAT:
This previous week was a big, fat nothingburger. With cheese.
The major focus was on Jackson Hole and Powell's speech. He said pretty much what I thought he HAD to say: inflation is a problem and they might have to raise rates. Why anyone expected anything different is beyond me (Goldman Sucks said there was a 35% chance he would talk about cutting - cmon).
Powell is stuck between a hard place and death.
If he doesn't raise rates, inflation will explode and it will tank the market. If he raises rates the market will tank and inflation will explode. I see absolutely zero chance that the Fed has any other choice than to raise rates.
I was surprised that the market did not sell off after Powell's speech but that just tells me despite the MSM prognostications, they also didn't expect anything different.
Of course, his speech did follow the main event of the week: NVDA earnings.
Look, the only datapoint that matters to me is that NVDA has been leading the market higher and despite blowout earnings and outlook, it got sold off hard.
What does that mean for the Nasdaq? Unless another one of the sacred Seven take the lead, then the primary leaders of the move higher are done leading - and that is very bad for long positions. What's even worse is that from now until the Fall, there is nothing I see on the calendar that will move this market higher. What announcement or news is possible to ignite a new bull move higher? Anything?
Sure, the Fed will keep jawboning daily but as I said earlier, its not like they really have a choice - rates must go up. And they will raise them before the end of this year.
But what else is going to cause bullish excitement for the overall market?
From my perspective, the news flow is going to turn somber if not outright negative. From geopolitics to the economy, I do not see this being an overall positive time period.
Add to that the seasonality of the markets in September and October and its easy to see why I don't expect the tone to be anything but negative.
What I takeaway from last week is that the big positive catalyst delivered: NVDA did its job and yet, the market did not rocket higher. The big negative catalyst delivered also: Powell said they may have to raise rates etc. and yet the market did not move lower.
Why did neither of these major datapoints move the market? I believe it's because NVDA's news has been priced in, and them some. And I believe the market knows what I know: Powell has no other choice but to raise rates and that is being priced in.
From the number of downside break alerts that went off this week, it is clear to me that a move down is brewing. Across multiple industries and sectors, stocks are falling. Retail is ignoring the lessening technical support as usual and not considering something they haven't had to face in months: the market and stocks can go down.
I think vacation time is over - and it's time to get serious. Because the next couple of months are going to be historic.
SPY weekly continues to follow-through on its HCD to the downside. This weeks range was inside of last weeks so nothing has changed.
Short Term: Bearish
Mid Term: Bearish
Long Term: Bullish
CLOSED TRADES THIS WEEK:
I closed the following trades this week:
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TQQQ calls: +47% (7 days)
TRADE IDEAS:
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VNO, UVXY, TLYS, MNSO, BIG
If you are not a Member and want to see these, become one here.
MODEL 5K PORTFOLIO:
Since May 9, here are the numbers:
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Total Return: +100%
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Win/Not Win = 56%/44%
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Average Win = 112%
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Average Not Win = 57%
TRADE UPDATE:
CTXR
Still a loss BUT since its a lottery, and price printed a LCD, I am holding just in case. Not because of any Hopium.
UPCOMING WEEK:
I will be in the Boardroom:
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Monday: 7:30am to 2pm MST
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Tuesday: 7:00am to 2pm MST
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Wednesday: 7:30am to 2pm MST
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Thursday: 7:30am to 3pm MST
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Friday: 7:30am to 10am MST
Earnings this week:
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BIG - 8/29 BMO
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TLYS - 8/31 AMC
If you are interested in taking a huge step forward toward profitable trading, then sign up for a paid membership HERE!
AUGUST TRADE CONTEST UPDATE:
Final week - positions must be CLOSED to count.
It looks like @EchoDaze will win!
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HONGULATOR: BJ Nov 75C - $1.30; current is $2.00; +53%
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JUSTJAKE: CSCO Sept 55C - $0.65; CLOSED for $1.30; +100%
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ECHODAZE: NEM Sept Put Spread - $0.19 credit; current is $2.24; +1070%
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MIKEYLIKES: GME Sept 30C - $0.69; current is $0.24; -65%
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SEALERWHEELER: SDC Oct 23C - $0.18; current is $0.03; -83%
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VAMPIRETRADES: BSAQ common - $12.20; doesn't matter - he's an ahole
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theBoss: NRDY Dec 5C - $0.95; current is $.70; -26%
RANDOMNESS:
Let's get the gloomy shit out of the way. In the next couple of months I expect the following issues to negatively impact the market:
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The Fed raises by .25 to .50 points
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Covid mask mandates come back
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China real estate market to get worse and start to spillover into the rest of the world
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The tech valuation bubble to burst - earnings start to matter again
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REAL inflation figures are reported that show it rising, not falling
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One bank will have to be saved due to their CRE, bad management and falling share price
If only one of these things happens, I do not see a way that the market absorbs it and then establishes a new longer term bullish trend. Right now, the best that the bulls can hope for is a blow off top. I was much more confidant of that before I saw how pitifully NVDA did - wouldn't it be ironic if the NVDA earnings win / NVDA stock fail was THE top?
I still don't think so. I still think that tech is due for one more pulse higher but I am a lot less sure than two weeks ago. It looks like all of tech, heck all of the market, is bouncing off of major support levels. Almost every chart I look at I see price near or at significant mid term, support. A bounce here could happen but in all honesty, I am struggling to see what the cause will be.
Coupled with the fact that Powell was hawkish and the market did not go down tells me that the market is still being supported, artificially. In the past when this has occurred, its been so the pros can sell to retail. But "they" are going to need a bounce to attract more retail.
Plus, all I heard this week was about the "head and shoulders" formation with the SPY. Too many people talking about it and very little bullish chatter does not set-up for a blow off top. It actually sets the stage for another drop.
Look, QQQ and SPY weeklies are in a sell. Until that is changed, it does not matter what I think should happen - the blow off top - what matters is what IS happening - the markets are in a sell. IT's important that even I do not get caught up in the whole conspiracy theme of pros trying to sell to retail; I could be right but the timing could be off.
What I am confidant of is that the rest of 2023 could be brutal for the US economy and for the Bulls. I do not see how the opposite happens.
WHAT'S THE PLAN, MAN?:
I want to be short this market. I already am short banks, CRE. But I want to get more short because once the market turns I think it could gather some speed to the downside. It's important to note that bear markets don't go straight down and bear market rallies are legendary for ripping your face off, bull or bear.
In order to try and adjust for this, you will note that I am going out even further in terms of duration for new Core trades. I have done this for two reasons:
First, I want to be able to have larger stops on the underlying and adding duration allows me to absorb larger price moves.
Second, I do not want to be too early and not have a position when the downdraft comes, without taking a bunch of stops.
I believe that I can trade intratrend moves with the TQQQ or other ultras. They are fast and cheap and more like scalping. But I want the overall portfolio to be bearish. As always, timing is crucial so again, using longer duration helps reduce some of that risk.
To be frank, the only reason I am not heavily adding to shorts is because of the possibility of a blow off top. This coming week I have no less than three trades I am waiting on to break to the downside through major support. So I have plenty of candidates. Now I am waiting for confirmation.
A WORD ABOUT SAMPLE SIZE:
I was talking to a member this week and we were discussing the model portfolio performance. He noted that since the end of June, the portfolio has done not much. I agreed but what I told him was this: at a minimum, there needs to be at least 100-200 trades in order to truly measure the effectiveness of what I do. I KNOW it works but for you all, there have been successes but we haven't had any huge wins lately.
It happens. The more trades that are done correctly, the more probable it becomes that the probabilities that I stack in my favor have time to play out. It's sort of common sense that you need a large enough sample in order to have a chance to duplicate past history performance.
Trust me, I have thought about just shutting the portfolio down now with a nice 100% gain and then waiting until May 9, 2024 to open new trades. I mean, I could lock in 100% and do nothing the rest of the year, and then some. Great for marketing.
But of course, I do not care about marketing or building numbers - that should be pretty apparent by now to you.
What I do care about is constantly searching for opportunities with high probability when the environment is ripe - and I think the rest of the year is going to be fantastic from that perspective.
I am not concerned about getting "all" of the move. That's not what I do. I only need to get some of the move to profit. I am very pleased with the tweaks I have done over the summer (less lottery plays, less earnings plays, longer durations) and believe they will add alpha to the overall performance.
But I do want you to think of something very important: the model portfolio is up 100% IN TOTAL PRINCIPAL even though there has never been a time when I was anywhere even close to having 100% of the principal invested. This is a huge deal. While the majority of the portfolio has sat in cash, the sum of the trades I have done have been enough to double the account size. How many times have you ever seen this in your investing experience?
So, don't allow bias to enter your expectations. I have told many of you that what I expect is for the portfolio to gain between 50% and 150% per year. Yes, I have a much tighter figure and it is closer to the higher number but I want to temper my expectations. And yours.
Please don't become a "spoiled" investor who expects every month or quarter to add 20-50-100% gains. Not going to happen.
I AM confidant that if I can continue to take swings, then the probabilities will work in my favor and I will end up hitting my targets. Investing is like life, it can be streaky. Win streaks, losing streaks, boring streaks. That's why you don't really see me get that excited or down, depending on the trade. I am pleased to see most of you doing the same. Good job!
CLOSING COMMENTS:
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If there are any stocks or investments you want me to look at, send the to me at info@MrNotAdvice.com. I will answer them in next week's newsletter.
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Don't forget the Discord live chat is STILL FREE but it will be closing to new members soon. In the meantime, come and join us - its the best community out there: Discord.
Thankyou Family!
theBoss
Nothing above is investment advice nor should it be construed as investment advice. It is offerred for entertainment purposes only. Always consult your advisors before investing any money. Do not "follow" or "mirror" any trade ideas provided. Mr.NotAdvice is not a licensed or registered investment advisor. Do your own research.