top of page

Members Trade Alert: Increased Short Exposure $QQQ

BotTrigger Trade Alert: Bought the $QQQ September 2018 $175 puts @ $22.35 for a 5% allocation | momentum stop-loss set for if QQQ goes above $162

The wind direction continues to change for tech. There’s now a war of words between Facebook and Apple. A tweet war between Trump and Amazon. An analyst war between Wall Street and Tesla. These issues of privacy, unfair taxation, and insolvency have existed for a long time but because of macro dynamics this group of tech leadership has always been able to overcome. Not anymore. Something significant has changed. Not necessarily in the fundamentals but in the technical ability of the market to react. The return of free market dynamics among tech leadership is profound. Stocks like NFLX, TSLA, AMZN, FB, etc...are showcasing wild volatility. Make no mistake, this freedom of stocks to trade as they should is the most important of all developments. We don’t consider ourselves to be rigid bulls or rigid bears; we simply prefer to see stocks trade as they should in either direction. Coming out of an era of market manipulation, all market commentary must begin and end with such discussion. The wind direction has changed.

Assuming a free market, we can have rational expectations for what happens next. Over the weekend new variables were introduced to further reinforce downside pressure. China responded to Trump’s steel and aluminum tariffs by imposing tariffs of its own on 128 products. The highest tariffs of 25% will be imposed on top of existing duties on imports of US scrap aluminum and various kinds of frozen pork. A lower 15% tariff will be slapped on dozens of US foods including wine, fresh and dried fruits such as cherries, nuts such as almonds and pistachios, and various kinds of rolled steel bars. Of all the negative variables, we believe tariffs are the most potent. This rollout of Chinese trade retaliation is only the beginning. Wait until Robert Lighthizer announces Section 301 tariffs and then watch China really retaliate against big tech and aerospace.

Even in these early stages, the S&P is dropping intraday below its red line of 2581. Thus far, we are adding to our short exposure by buying a 5% allocation of QQQ puts under $157.

Our major portfolio move will occur if the S&P closes below 2581 and then opens below 2581 the next trading day. 2581 represents a risk of market crash. If this breach happens, we will utilize all remaining cash to purchase more QQQ puts. This fully loaded allocation will be held for as long as the S&P is below 2581. A first attempt at implementing a fully loaded downside portfolio could be initiated this week.

Some of the greatest pearls shared by Jesse Livermore:

“Money is made by sitting, not trading.”

“The desire for constant action irrespective of underlying conditions is responsible for many losses in Wall Street even among the professionals, who feel that they must take home some money everyday, as though they were working for regular wages.”

“Buy right, sit tight.”

“Nobody can catch all the fluctuations.”

“There is a time for all things, but I didn’t know it. And that is precisely what beats so many men in Wall Street who are very far from being in the main sucker class. There is the plain fool, who does the wrong thing at all times everywhere, but there is the Wall Street fool, who thinks he must trade all the time. Not many can always have adequate reasons for buying and selling stocks daily – or sufficient knowledge to make his play an intelligent play.”

“It takes time to make money.”

“Don’t give me timing, give me time.”

bottom of page