7/11 Recap

I got alot of emails yesterday with questions from confused people. Let me clarify what I said yesterday. Nothing is changing for anyone subscribed by sunday, all that is happening after that is substack has an integration with discord now that I’m going to use. When new people sign up, they are in the discord automatically vs how it is now, on the flip side when they unsubscribe they are removed as well. This does not matter to anyone who is in the discord before then. Whatever you signed up for and paid, that is what you pay until you choose to leave. It’s nothing material at all just simply I cannot have multiple payment options work with their integration and so there is no yearly option anymore for new people after sunday.

Let’s look at the 3 charts below SPY, IWM and RSP, the market and small caps. Tell me what you see?

A rotation is under way, you can clearly see it in the price action. Don’t fight it, embrace it. Market is pricing in a September rate cut now. It’s done this many times and it hasn’t worked, but for now big tech is out, other stuff is in. The equal weight SPY is up, small caps up, big tech down. Doesn’t mean its forever, and likely it is probably just till earnings season for the big names in a couple weeks, but tech is out of favor now. Their earnings will be spectacular and investors will be back soon enough. Look at yesterday’s recap I highlighted stuff like FIVN and JMIA, that was what saw buying. Higher rates were great for big tech because they meant every other company was facing headwinds and those with all the cash were ok. Now with it looking like rates will be cut, yes big tech is ok still, but now look at the IWM, that collection of small cap stuff with sketchier balance sheets looks set to run. Look at things like REITs, Utilities, etc. All look ready, I even remember a day recently where I highlighted 2 REITs seeing call buys and joking about that being an odd thing because those don’t typically see call buys. VRE in the 6/26 here is up almost 10% since, for a REIT and in 2 weeks, that is a colossal move.

So now what? Well if you’re in positions short term, you can close them up if you want, but nothing is materially wrong with megacap tech, just sometimes they don’t compound at 2-3% a week for a little bit. They’re all being sold short term, many losing key short term moving averages, it is a rate driven move nothing actually material. That is again why fundamentals don’t really matter to me, the market is one big theme trade and we have to focus on being in the right names at the right time, that’s it. It is very apparent what is happening today and the price action always tells the truth. Tech has had an incredible run, no shame in accepting that with today’s reversal, and cashing in some of these gains if short term matters to you. Will all these tech names be higher in 12 months? Most likely yes, big tech is all we have, literally it is 30% of our market. For now we need to watch the 21 ema on all names we’re in and for the overall market to know what is going on with the trend. Currently, we’re still in an uptrend in the overall market. Maybe today was simply an overextended market cooling off. Again the SPY hasn’t even broken below the 8 ema yet.

Again you might say well James if you know tech is going to be weak, why sit in those leaps you have. Well, the reality is, if you take a position and aim for long term capital gains, which is why I used leaps to begin with, it is highly unlikely you’re going to see 12 months of up in a straight line. So this is completely normal and expected for me at some point along the way. I’m ok with it and like I said all you can do is adjust your short calls lower vs your position if you want and profit some more from short term weakness. If you want to cash in your gains and buy back when names settle down and moving averages are reclaimed, that is obviously better, but that isn’t really realistic for me because I have such a large gain on these leaps and I’m not trying to create this big taxable event to maybe get back in a few percent lower. That works if you’re trading small size or in a retirement account, I am not doing that.

Recent Trades

BIDU - I highlighted this one 2 days ago just under 92/share, this got as high as 104 this morning. This trade was really picking up steam the last 2 days with nonstop bullish activity. It has run hard, but I think it has alot of room left to run.

Trends

Interestingly the biggest bearish trend for a while has been AAL and today it got smoked with the bad report from Delta. Looks like the positioning on the bearish side of things worked even though it is near impossible to short things in this market. On the bull side, Tesla has been leading for a while and today it got crushed on news its robotaxi reveal was pushed back. Yea this is what I was talking about, Tesla just makes up stuff, pumps the stock and then reality hits. It’s done this for a decade, which is why I try to ignore it in here. It tends to burn everyone in both directions.

1 Week

2 Week

1 Month

Today’s Unusual Options Activity

Here is today’s link to the database, the rest of today’s action will be added by the afternoon and as always this link will expire at the open tomorrow morning