October 11 Premarket – The Solution

As the rear view mirror crowd (most everybody) finally figured out that bond yields are going up, then of course the stock market effects show up and the freak out begins. But you guys knew the problem, which I kept writing about, AND THE SOLUTION. And the solution. And I clearly, clear as day gave you the solution to the problem – WAY AHEAD OF TIME. And I know some people did not listen to me. I presciently saw, recognized, understood, AND TOLD YOU GUYS – the solution. In markets the solution is way more important than the problem. The solution is the action – either selling or not buying – that is the solution to a problem in trading. What was the solution? Do you need to know the problem also? Well I clearly stated both – on August 17th – WAY AHEAD OF TIME – I am out of all position trades,100% cash in my bigger-type stock account. (And going to only very short-term trading with small stocks.) And I also gave you the problem – WAY AHEAD OF TIME – I’m not finding many setups in the bigger-type stocksAgain, the solution – 100% CASH. Also for the 1000th time – it is a secular bull market in stocks, the selling sets up the next great opportunity to buy. The selling allows for the next setups. Yesterday in the premarket comments I posted no individual stocks – for a reason, look at the market yesterday. I discussed several times recently, my only SMALL STOCK short-term trade, in CRMD, that is a 1/4 position, stop still at scratch, 1.15. I will discuss the overall stock market view in another post.

From August 17:

The occurrence of tops in July/August was discussed previously. And the SPY charts from the previous 5 were discussed as models. I’m always looking for/trying to recognize stocks which are – setting up for breakouts, turning the corner to the upside of accum or reaccum, setting up for bounces (smaller stocks), or setting up for springs. I’m not finding many setups in the bigger-type stocks.

I am out of all position trades,100% cash in my bigger-type stock account

In the last week or so, I sold INTC, long-time 10 month holding IMMU, VNOM from the 4/2 stock list. And yesterday – I sold AMD from the recent bko in the 17s, used the rally in the SPY into the top of the gap. That SPY gap resistance was drawn in with Wednesday’s SPY chart. Also, I lost 5% on AMAT sold in after hours, it came out with earnings. It was bought very well, right into the spike low spring setup two weeks ago. I was up literally within minutes on that purchase, never down on it, until yesterday obviously, and usually those work well for me, and thought it had more in it. Yes should have sold before earnings, but I was never down on this thing, and just knowing those can be big winners. Oh well.”

 

Also, what have I been warning about with the retailers, several times. I was WAY AHEAD of the crowd in recommending the retailers for the great buy setups, and putting many of them on my 4/2 stock list, and then WAY AHEAD of the crowd recommending getting out of them.

Below are comments, from last month and which are referencing previous comments:

This website was very very early on catching the big bottom going on in retailers – very early. I discussed multiple symbols early this year, put them on my 4/2 stock list, they were outstanding performers for months, the #1 group. But a few months ago, I started getting cautious, discussing the EAs, the failing bkos, upthrusts, the extreme bullishness and conviction and upgrading by the geniuses on Wall Street – way after I had started buying and posting the symbols. Last week I had a few discussions about them again, go thru the charts if you want to understand what I’m talking about, and as more red volume coming into them. And we can add FIVE, TGT, ETSY, KSS, KR, and LULU added a few days ago:

As far as the retailers, and I meant to include upthrusts in that comment this morning also – LE, M, NWY, URBN, ANF, AEO, BIG, CONN, DKS, DLTR, DEST, TLRD, SHOO, WMT. Yes there are retailers still working, GOOS had a solid day, but nothing like the plethora which were working before. So now resetting/reacc or such can get more setups again.”

AND THIS:

The retailers were discussed here multiple times over the last year, they were the main focus of my 4/2 stock list, I was way ahead of the crowd with that, they became the top sector in the market for many months. And way after I published my 4/2 list and the stocks were substantially higher, then the rear view mirror crowd finally figured it out and EVERYBODY started recommending them, hyping them, ratcheting up earnings expectations. All of a sudden AMZN was not a threat anymore. Total incompetence once again.

Several weeks ago with the retailers, I started getting cautious, discussing it, noting the hyping and the love affair by everyone. Go back and look at the discussions, I no longer link for a reason. They were distributing, EAs, bkos not working. I’m still cautious about them until solid resetting. And along with chip stocks, is this saying something about the overall economy. The Fed meeting is today, I continue to believe that they will have a long pause in raising rates once the 2 year yield gets above 3.25%. That rate was at .5%, up from .1%, the first time I did a detailed public post about my belief that short-term US yields were in a secular move higher. Now they are 2.85%. Junk bond yields still are relatively stable, when JNK really starts breaking that is a problem, until then this is all moot.”

Back in early February, right into the lows, when I did multiple posts about how “this bull market is still intact, it is not remotely over, it is a buying opportunity, we’ve seen the #1 and #2 EA lows” – all ended up being pretty prescient, done right into those lows – totally put my ass on the line with those posts. And also recall all of the wildly incompetent claims by most everyone else, those with a blog post, or an analyst job, or a big website, or a TV financial show. So with all the indexes having gone to new highs, yes we are getting a pause in most stocks, even tho the DJI more new highs. The mid-term elections coming up, October the weakest month of the year, so the pausing, backing up, resetting is good, but if the DJI continues higher it would set up a more concerning situation. I’ll state again, it is a bull market, the trend is up, but there aren’t nearly as many setups on the bigger stocks as earlier this year.”

 

As to bonds and the stock market effects, multiple times I have discussed how for years going forward, here will be the overall setup with bonds vs stocks –  Bonds will break out to new highs in yield, they will surge, the yield curve will widen, they will attain the next yield res area, they will have a multi-month drop in yield (TLT up in price), and that rally in the TLT PRICE will then set up the next top in TLT. Also – the “bond selling will weirdly lead to bond buying, and a bigger bounce before another round of selling.”

This was clearly stated into the top in the stock market in January when I kept saying that the bond yield surge will bring on the volatility:

From 1/30:

Bond yields are continuing to push higher, but I am aware of this overall area with my long put position in TLT, as the always way behind/late to the party crowd is getting very bearish, and the potential for bond selling to weirdly lead to bond buying, and a bigger bounce before another round of selling. For instance with the effects on the stock market. One reason I keep warning about the situation with TLT, and that 10 year yield breaking out, is because of the psychological nearer-term effect on the stock market.”

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About traderscott 1071 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.

4 Comments

  1. What do you think about gold scott ? From my experience , the spike down in Aug and the ledge formed since then seems to be the bottom . I am buying here with a stop below 1180.

    • I discussed gold and a bko in the other post this morning, and yes I have discussed that other stuff also. You did a good job, now it is just about managing the trade, hopefully you have moved up stop with the rally. I don’t feel comfortable when gold rallies on “safe haven” moves, they do not have as much sustainability.

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