10/27 Recap

I had to head out just a little early today but overall we got a nice rally in the market today after Amazon lifted all the tech names. We were really short term oversold there on some pretty unfounded fears. Across the board this week Visa told us consumers are spending alot of money, Google told us retail sales were very strong in their ad business, and Amazon told us their 3rd party seller market place grew 20%. I think we can finally put to rest the constant worry about the consumer and all that nonsense about “running out of savings” and credit card debt. The reality is the bottom half of our society has always been running out of savings, I don’t think there’s ever been a time in recent memory where they were doing ok even with the covid stimulus money.

With that out of the way we now head into a period of wait and see until the November fed meeting. We’ve had pretty good prints in megacap tech to this point ex Tesla but all carmakers did poorly, look at Ford today, so that’s more of a Tesla thing and not a megacap tech thing. Apple reports next week and that is the one most people have been worried about so that is the next obstacle for the market, does the largest market cap company hold up into these fears. We shall see.

The SPY and IWM are both red today with only megacap tech working. Here is the SPY, you can see the daily weakness since the breakdown.

Here is the IWM going for its lowest weekly close of the year, in the last 13 weeks it has seen 2 green candles, this is just dreadful. It down pretty much 20% in 3 months.

This is what I’ve been alluding to for weeks now, the reality is outside of megacap tech, these companies in our market are very mediocre considering today’s rate environment. If rates go lower, then you can consider them, for now, most are just not investable. I don’t want to say we’re in a bear market because we’re not, we’re just in a very narrow market where the leaders are just completely dominating, hold no debt, and rates don’t matter to them. The rest of the market is a different story. I don’t want to say we’re in a bull market either because you can’t be in a bull market with small caps getting crushed daily.

Did any of you happen to catch the DECK trade I noted in the recap 2 days ago? DECK is up $95 today, yes up 20% and the player who put on that risk reversal below made a ton of money because the trade was nearly free with the puts sold. Unbelievable trade.

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