3/2 Best Idea For The Week Ahead

The SPY closed at another high yesterday, we are now up over 20% from the late October lows with only 2 red weeks in the last nearly 4 months. If you look at the RSI on the weekly, we remain very overbought, but we have been for a month. The market is only up 2.5% in that timeframe so it isn’t like it ran away, but we haven’t gotten any signs that this is slowing down soon.

More remarkable is how the market has been able to do this with 3 of the 7 largest companies underperforming dramatically: Apple, Google, and Tesla. Breadth has picked up and smaller names are picking up the slack. In the scope of things, this is nothing more than a technical breakout from a multi year base. Look at the chart below and the market has come full circle breaking above the 2021 highs and it is continuing out of that breakout. That is a big part of my Amazon thesis if you remember, a move over the 189 highs from 2021 will lead to a similar breakout.

At this point there is so much fear of missing out going on that I expect all dips to be bought. If and when we break some of these key moving averages, then we can start to discuss moving to the sidelines or being short things.

This weeks best idea is a hot young company with a lot of bullish option flow after earnings. I know the company fairly well so I have alot points to discuss regarding it and its future and then I have a great trade that I think could potentially be a massive return if all goes well. The way I structure it, you get paid to put the trade on so it shouldn’t get hurt if it doesn’t work out because I’m going to discuss an uneven risk reversal. If the name goes up in the next 2+ years, you will make a alot of money on zero risk and if it goes down, great you will be buying some at bargain basement prices. That’s how you have to think about structuring every long term trade before you place it.