Today’s an interesting day, with strong rotation out of tech, notably AI-narrative names, including semis that are getting sold hard. Rotation is moving into stocks and sectors banished to “Misfit Island.” It’s clear to see when I look at the Consumer Discretionary most shorted basket up 3.5% with the Consumer Discretionary weighted index down 1.6% – Amazon and Tesla each have about 20% of that weighted index. With rates dropping, in perhaps an equity risk-off rotation, even homebuilders are rallying after Pulte’s lackluster earnings. ITB ETF is up 4.6% and is a recent new long idea. If you added the Big Picture note and read the latest, I turned constructive on bonds – notably with 5 – 10 year duration. Added half positions in two ETFs, 5% weight each, allowing up to 10% for both in the asset allocation if rates go higher.
The carnage in the tech space is ugly. From what I have written for a while, this doesn’t surprise me. As a former dedicated tech trader who’s seen some nasty tech sell-offs, I see significant signs across the tech food chain. With semiconductor capital equipment under pressure after already being well off the summer highs, that speaks volumes, and it’s hitting memory stocks and the neoclouds hard. My Q2 shorts in memory were a mess, yet I covered them down to 1% weights and they still lifted significantly was baffling to me. I added them back near the highs at max 5% size and covered them (making back what I lost in Q2) on the Situational Awareness hedge fund blow-up, which was also the large buyer that ruined my Q2. I scaled back into these semis because I was clear I was using a shotgun vs. a sniper rifle, and they’re well in the money now. I heard from my GS neighbor, “they were back, baby,” not specifically referring to Situational Awareness, as he wouldn’t, but my other neighbor is a sales trader at JPM, and I asked him about the public story they cut off margin to Situational Awareness, and he just said, “those guys were buying $100 million in OTM call options, right?” Asking me, and I got some options flows through the Bloomberg chat that I could only guess were Situational Awareness, with huge call buying in semis and tech. When your leverage is cut off, and you still want to maximize upside, why not use calls in size? What could possibly go wrong? Situational Awareness has ties with Anthropic and holds a large weight. I’ve speculated that the Anthropic IPO could be a tough sell at a $2 trillion valuation, with reports that investors think it should be $1.5 trillion. I also said the Anthropic IPO could be postponed because of market conditions. That is seemingly getting more likely or at best a greatly reduced valuation. If that happens, I could see even more pressure on Situational Awareness and perhaps a second massive blow-up within 6 months. Jane Street, one of the largest investors in the fund, might rethink giving a 24-year-old gobs of money (possibly twice) to bet aggressively in a narrow list of similar sector theme.
Another news item today is a major cyber hack affecting many websites globally. It’s knocked out my email distribution app (that’s why you didn’t see it in your email this morning). A fund manager in our chatroom mentioned his wife is a high-level technology person, and they are getting deeply concerned about financial institution hacks. He posted this podcast, and it’s worth listening to, as cybersecurity could have hit a brick wall.
I’ve been consumed with finishing the new site and hope to launch next week, so please accept my apologies for a little less content or quick email responses. Late nights and early mornings are exhausting, but well worth what’s coming.
Quick Market Views
Stocks: An ugly day with the major indexes however S&P breadth is positive with 324 up and 178 down. The Mag 7 is down 3.55%. Defensive sectors and consumer discretionary are most shorted – a lot of retailers are moving up significantly. Check out the MU and SNDK current positioning below.
Bonds: Rates are down big. with 2’s and 10’s down 17bps, 30’s down 12bps
Commodities: Mixed with Crude up 2.4%, metals getting hit. Copper down 2.7%, Gold down 2.3%, Silver down 5%
Currencies: US Dollar Index is down 0.2%, Bitcoin is down 4%
Current Portfolio Ideas:
Changes: No changes, as I have been flattening some ideas due to the relaunch of the new Trade Ideas page. If you followed me adding the November 20th expiration SPY and QQQ put spreads, they are moving in the right direction and in the money. We bought the SPY 755-730 put spread for $4.65 now $4.95. We paid $6.70 for the QQQ 700-670 put spread, and it’s now $8.55. As always, manage these on your own with your own risk tolerance as they get into the money. Taking off half with doubles isn’t a bad idea to create a free downside hedge.
US INDEXES
S&P 500 Index daily has a potential new DeMark Propulsion qualified but not confirmed. We will know if this confirms tomorrow, as it has to jump through some DeMark qualification hoops. If confirmed, the downside target is 7501. This indicator is one of the only DeMark indicators that works on offense, i.e., if confirmed, it goes to the target. The upside Propulsion in early August went nearly to the target and the recent downside target nearly hit it in September. And below on the NDX the upside Propulsion hit the target.
Nasdaq 100 Index daily is back to the August/September lows. With the continuation lower after Setup 9 and a short-lived bounce, a possible new Sequential is starting on day 1 of 13. I like to see another day or two with the Sequential, but this could get ugly.
current portfolio
I’ve been flattening out some positions ahead of the launch of the new trade ideas format.
On the Big Picture note, one of the bond ETFs I recommended was IEF, and it is working well today.
LDOS is a diversified tech/defense company that I’ve been posting recently after buying this one closer to 100. A new upside Sequential is beginning. I still like this one.
I added ITB Homebuilder ETF recently and it’s up nicely from our entry. Up 4.6% today alone.
Two turnaround candidates I have recently bought (and are still just under my cost) NKE and LULU – def two on Misfit Island have been improving both with new DeMark Sequential Countdowns starting. The amount of pushback on X when I said NKE could work after the earnings gap down was extreme. It’s currently up 20% from the low.
MU Micron is breaking down with a potential new downside Sequential starting. If this breaks the wave 1 closing low (yellow 1) it would qualify into wave 3 with a possible downside wave 3 price objective of 445. Ouch if that happened.
I was asked to show MU and SNDK’s current positioning with what everyone will be able to pull up with any stock on the new site. This is a type 4 crowded long, with downside positioning. The only bullish aspect is the high put buying right now.
SNDK is breaking down with a potential new downside Sequential Countdown starting
I didn’t put the full rundown but it’s nearly the same as MU
Hedge Fund Telemetry ETF Percentage Price Oscillator Monitor
The PPO monitor (percentage price oscillator) force ranks ETFs by percentage above/below the 50-day moving average. This monitor and others are offered to Hedge Fund Telemetry subscribers on Bloomberg. Some real ugly action in tech, metals, miners. ITB a new recent long is working best today up 4.4%.
Index ETF and select factor performance
ETF with today’s performance with 5-day, 1-month, and 1-year rolling performance YTD. Crude and defense back on the field
Goldman Sachs Most Shorted baskets vs. S&P Indexes
This monitor has the S&P indexes and the Goldman Sachs most shorted baskets. Consumer discretionary most shorted basket ripping while tech most shorted down nearly 5%. Defensive sectors are back leading after a few days off.
DeMark Observations
Within the S&P 500, the DeMark Sequential and Combo Countdown 13s and 12/13s on daily and weekly periods. Green = buy Setups/Countdowns, Red = sell Setups/Countdowns. Price flips help identify reversals up (green) and down (red) for idea generation. The extra letters at the end of the symbols are just a Bloomberg thing. Worth noting: A little for everyone.
Major ETFs among a 160+ ETF universe. FXI a current long with new Sequential buy Countdown 13 today – trading above today’s open is a small positive
If you have any questions or comments, please email us. Data sources: Bloomberg, DeMark Analytics, Goldman Sachs, Street Account, Vital Knowledge, Daily Sentiment Index, and Erlanger Research