10/2 Recap

We averted the government shutdown over the weekend and futures opened up big last night, overnight they sold off to flat, and we took off at the open only to hit last nights highs and move back to lows again. The market is just not in a good place right now. Breadth is almost 90% down today with only megacaps being green really. This morning you had Tesla miss delivery estimates by 20,000 units, that is terrible for what is supposed to be one of our “growth” leaders. I know bulls will say it was still +25% year over year, but that is irrelevant, when analysts set numbers, you either beat them or you don’t. It makes you wonder how many more megacaps have estimates that are just too highs because the consensus was overly bullish……

The SPY is now working on a potential 5th red weekly candle in a row and currently is still below it’s 8 ema which it hasn’t reclaimed in weeks. It could be bottom here as the RSI is at move oversold but what is the catalyst to buy stocks? Do you think the majority of names this coming quarter beat and raise? I don’t, in fact I think over 50% of the names that matter, the megacaps, won’t.

The big one today was the move in the XLU, utilities down 5% in one sessions and down 15% in 12 sessions. This is a very defensive sector and this bloodbath has to be worrying many investors, you have a name like NEE which was regarded as one of the best utilities around and its down 30% in 5 sessions. These aren’t tech stocks, investors aren’t looking for his beta moves like that here.

The TNX is soaring and is back to max overbought levels after last weeks small reversal off the inverse hammer. Yields are really putting a damper on everything and we really could just have a continued period of sideways, we’re already at 2 years of nothing on the SPY, another prolonged period of nothing shouldn’t surprise anyone but equities really can’t go up with yields on this nonstop push higher.

Oil on the otherhand is working on it’s 3rd straight red candle and has fallen almost 6% in 3 sessions. This has become a consensus trade and that is usually not optimal for bulls. You will see the countless bearish oil trades I noted below today in the table. Some oil names look ready to fall off a cliff.

Overall not much has changed, earnings are 3-4 weeks out for most names and we’re going to be in this lull until these companies give us guidance going forward. I think premium sellers are going to do great here as we do mostly nothing. The market is on a week to week basis as this point with all the macro concerns and it’s hard to project forward until these companies let us know what they’re seeing.

What’s interesting today is how megacap held up so well with all of them green while everything else sold off including defensive stuff like XLV,XLU,XME. I know I joke about megacap being all we have, but it’s the truth, those companies balance sheets get stronger every single day, you can’t say that about the rest of the market that is constantly dealing with one worry after another. Nevermind the fact that high rates are tremendous for these megacaps with all the cash they hold. Are people piling into big tech for the safety trade again like we saw not long ago? Sure seems that way today as a 90% downside day is usually a sign of panic selling but none of that was visible to the market leaders.

Trends

UEC saw multiple put buys today and a few last week, as the uranium trade finally saw some unwind with it being down almost 6%. In megacaps the call buying seems to be in AMZN,META, and AAPL over the last 2 weeks, not seeing much from MSFT/GOOG/TSLA. A name that we don’t discuss enough is UBER as it remains very highly bought on every timeframe. That name has held up remarkably well through the recent market weakness, something to note heading into earnings season.

1 Week

2 Week

1 Month

Today’s Unusual Options Activity