MARKET SUMMARY (12/23/19) – SMALL BETS

It’s the holidays, so let’s make this quick and get back to stuffing our faces and stockings.

The market continued its march higher, breaking to new all-time highs and ignoring the permabears and countless chart experts who were screaming about all the negative divergences and overbought conditions. While I’ve recognized the same things and became cautious because of them, my experience told me not make any kind of short bet too early.

Patience saved me a little bit of pain by risking an early short, but I couldn’t sit on my hands forever.

I initiated some small short positions (put options at my usual 2% sized positions) on SPY and XLK as the rally grinded higher. These trades felt a little like the bets I made when I went the long the market in August and October – the charts were still saying I was probably still early. There’s no breakdown or trend break yet, and, in fact, some daily technicals were just starting to turn up.

However, I sized the bets properly and will accept the losses should they come. I was profitable a few weeks ago with a similar quick-hit put option bet.

We’ll see how this one goes.

Regardless, I’m not expecting much in terms of downside in the market. If you’re not yet convinced that this long-term bull market is not only intact, but strong, I’m not sure how many new all-time highs it will take to convince you. So for most of you, you should stay the course and hold on if you’re long. 

I think January could be choppy (emphasis on “could”), but it would simply be another buy-the-dip opportunity that I’m hoping we get. 


2 THINGS ON MY MIND

1. I hope everyone has a great holiday. It’s been a wild and hopefully profitable trading year for everyone, and I’m looking forward to another successful one next year.

2. Bitcoin continued its bounce. As I mentioned a few weeks ago, I was willing to give it the benefit of the doubt to try to hold support and make a double bottom right when it looked like it was about to break down. It just felt like the positive divergences and laziness of the downside was signalling strength under the surface.

Since then, it’s been doing what it needs to do, breaking above every minor resistance it faced. I’m back to essentially a full-sized long Bitcoin position.


A CHART THAT CAUGHT MY EYE

CUBE – Cubesmart

I’m not sure what’s going on in the self-storage market, but two names, Cubesmart (CUBE) and Public Storage (PSA) popped up on my radar with similar high-potential charts. It’s normally a good sign when you have multiple comparables confirming some sort of breadth in price action.

CUBE has rallied strong off its lows, so ideally we’ll get a little dip to buy. Regardless, the set-up looks nice with strong daily technical divergence and a quick move up slicing through several resistances. This is a strong move. The weekly charts are similarly vaulting off of very oversold levels and retaking support.

I’m a buyer on any dip.

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