August 27 Premarket Comments

There are new posts for subscribers – here with the conf call and a post here from intraday Friday. They contain a lot of info and symbols, keeping it simple today, this is going up early, giving you plenty of time to study and review this and the other posts.

The stock market more new record highs, there has been nobody more consistently bullish than I out of the Feb 6-9 EAs, the #1 and #2 EAs – the beginning of the reaccum. I have put out a multitude of symbols, plus an “official” list on 4/2, the very low day of the retest. And you have gotten outstanding advice for the single best TRADING sector, the pot stocks, for the past couple of weeks. (Retailers have been the best sector overall, but that is for the year as a whole.) CVSI was given on 8/8, CGC, CRON, TLRY given every day for the past 2 weeks. They have been outstanding. Numerous opportunities. They will put in tops at some point, but I stick with what is working. If you are not taking advantage of these opportunities, new symbols won’t change that.

Posted below is an article from Bloomberg, about the lousy performance of the big hedge funds this year. They missed the low areas, and have been fighting the trend, not believing in the trend, looking for the big top in the trend, and they have totally blown it. You read the article and see all the mistakes people constantly make – they are focused on interest rates, the Fed, tariffs, Trump, and they completely misunderstand that trading is about probabilities, patterns, and setups. All the rest is noise or sentiment or opportunity to go the other way. That noise has ZERO to do with the trend.

IT IS A BULL MARKET.

So I’m reposting last week’s discussion. Compare and contrast the quality work put out at this website, and the crap just about everywhere else. The hedge funds literally should have fired their advisors, consultants, researchers. Then they should have gotten a subscription to this website, and they would be killing it this year — IF they would have listened to me and IF they would have believed in my work.

 

From last week:

The Russell 2000 more new all-time highs, SPY, QQQ are both sitting right below their all-time highs. And for months multitudes of individual stocks have set up beautifully and have broken out. And the idiot permabears are still chanting about bubbles. For many years, and since the, and right into the, February lows, I have remained resolute about a secular stock bull market. Is anyone listening? Who knows.

My 4/2 list, consisting of 39 (38 now with the RSPP buyout) stocks, in the last few days – TEAM, BFAM, VNOM, WDAY, MEOH, LULU, FIVE, AEO, ANF, CTRN, SQ, ETSY, have hit new highs or all-time highs. And RSPP got bought out recently at an all-time high. That is 1/3 of my list. And 1/3 of my 4/2 list were up over 50% at some point. Plus 4 of them tripled. Only 2 of them have not been up at least 10% at some point since 4/2.

I am also the first to point out, that one very big reason why that list has done so well is because of the overall stock bull. “Don’t confuse brains with a bull market.” But this is also the point for the other part of the performance – getting the stock market right. That stock list was given to you guys in the premarket on 4/2. Why is that significant? That was the exact low day (thumbs up, chart below) of the final retest before the SPY, the OQQ, the IWM all then eventually proceeded to hit record highs. It was also when almost everyone thought the stock bull market was dead. The 4/2 low, you can not get closer than that. And the group was stocked with retailers, which have then become the #1 sector this year. That is pure hard work, zero magic involved in doing well in this business. That list could have been much better if given more attention and planning and with more hours in a day. I did that all in one weekend because I wanted to get that posted for you guys by that Monday, 4/2, as I believed the turn back up in the market was very close.  And I received 3 comments about it – 3 comments.

Unlike the multi-billion dollar hedge funds, brokerages, banks, mutual funds – I had no staff, no research team, no advisers, no consultants. All 100% my work. And that list blows away all of those huge money management organizations. The performance discussed here, the numbers are better now. Plus this discussion does not even include the many many many smaller trading stocks that have been outstanding performers which have been posted all year, and more of them just this week. Like with CVSI which has been posted 15 times in the last few weeks, one of the best pure trading stocks this year. And last week and this week with the pot stocks, CGC, CANN, TLRY, CRON, with CTRL, WIN, NIHD, TRXC, etc. And having said all of this – about the 4/2 list and with all of these stocks and with all of these opportunities. Yet so little interest in this website. I am deciding how to proceed from here.

The thumbs up on the SPY chart is the premarket day when I posted my list – the exact low day of the final retest:

 

 

 

From Bloomberg:

U.S. stocks are vaulting back to all-time highs. But the smart money isn’t celebrating.

Instead, they’re nursing pain. Hedge funds have seen returns dwindling even as the S&P 500 Index marches forward in what has become, by some measures, the longest bull market ever. An index tracking the performance of funds focusing on equities has fallen in five of the past six weeks, wiping out gains for the year, according to Hedge Fund Research data compiled by Bloomberg.

How is that even possible? Blame it on a defensive stance and bad-luck bets. Net leverage, a measure of risk appetite among hedge funds, has fallen to the lowest level this year. While the posture would have curbed losses during a market selloff, right now it’s prevented managers from reaping bigger gains.

Also hurting are their favorite stocks, notably tech giants such as Facebook Inc. that have suddenly stopped working. Meanwhile, their bearish wagers backfired, with the most-shorted stocks jumping for a third week in four.

The agony is the latest lesson in the costs of turning cautious too early. While everything from a trade war to emerging-market turmoil threatens the nine-year equity rally, it has still paid to stay bullish with earnings rising the fastest since 2010.

Obviously, the defensive measures could still end up working. Hedge fund clients at Morgan Stanley have reduced their net long exposure to equities to the lowest level since last October. A similar measure from Goldman Sachs on its clients fell to a 14-month low.

The S&P 500 climbed 0.9 percent over past five days to close at a record of 2,874.69. Up in all but one week since June, the index has extended its 2018 gain to 7.5 percent. The Dow Jones Industrial Average added 0.5 percent over the week while the Nasdaq 100 Index advanced 1.5 percent.

With the S&P 500 trading near 21 times earnings, or about 20 percent above its 10-year average, the case for going all-in has weakened, according to Lamar Villere, a portfolio manager who helps oversee about $2 billion at St Denis J Villere & Co. in New Orleans. His funds held 10 percent of money in cash, versus a historic range of 2 percent to 5 percent.

“We’re looking for ideas to put the cash to work, but until we find the right value, we won’t buy,” he said. The elevated cash level “is not because we decided to take risk off consciously,” he added.

The importance of picking the right stocks is growing as the spread of equity returns widens to levels not seen the start of the bull market. Since January, the best of the 24 industries in the S&P 500 have topped the worst by 49 percentage points, a gap that exceeds any year at this point since 2009.

Facebook has been one big alpha destroyer lately. Ownership in the social-media company rose to a record in the second quarter, with 28 percent of the funds tracked by Goldman holding a stake. On average, the stock accounted for 4 percent.

Shares of Facebook tumbled 19 percent on July 26 after disappointing results and have since barely recovered.

Other hedge-fund favorites didn’t do well either. The Goldman Sachs Hedge Industry VIP ETF, tracking the most popular stocks, had risen 1.1 percent in the past month, compared with a 1.9 percent gain in the S&P 500. It’s a turnaround from the first half of the year, when the basket beat the market by almost 3 percentage points.

As the market rallied on, short positions got squeezed. Ironically, stocks targeted by short sellers performed better. A Goldman Sachs basket of most-shorted stocks has jumped more than 8 percent, poised for the best month since November 2016.

The pain was most obvious in health-care, where hedge fund longs were flat this month through Aug. 17 while their shorts rallied 5.6 percent, according to Morgan Stanley.

All are taking a toll on fund performance. The Hedge Fund Research HFRX Equity Hedge Index is now down 0.6 percent this year. At Morgan Stanley, its long-short fund clients saw their year-to-date returns almost halved over the last four weeks.

The general bearishness among hedge funds is a contrarian sign that the bull market has further to go, according to Ernesto Ramos, head of equities at BMO Global Asset Management that oversees $252 billion in Chicago.

“That people are not as long as they have been suggests there is room for money to come to the long side of it,” he said. “Earnings are coming in very strong. As the market keeps going up, they’ll fall into trying to catch up.”

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About traderscott 1097 Articles
Trader Scott has been involved with markets for over twenty years. Initially he was an individual floor trader and member of the Midwest Stock Exchange, which then led to a much better opportunity at the Chicago Board Options Exchange. By his early 30’s, he had become very successful in markets, but a health situation caused him to back away from the grind of being a full time floor trader. During this time away from markets, Scott was completely focused on educating himself about true overall health and natural healing which remains a passion to this day. Scott returned to markets over fifteen years ago where he continues as an independent trader.

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