Market When Closed, Tuesday 13 May
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Plain Sailing
by Alex King, CEO, Cestrian Capital Research, Inc
If you were set up correctly for yesterday’s equities moonshot - and if you have been reading this note regularly I do hope that you were set up for it - then your best bet today was to not over-think it and to just, in fact, do nothing whatsoever. If you did this then the market gave you free money all day. This is one of the more aggressive forms of FOMO rally I have seen in recent years; anyone not ready for it is somewhat bewildered and asking “why would this happen”? The answer, I think, is that so many investors had stepped out of the market and into cash or, worse, shorted vigorously at the lows. So I think the violence of this up-move is due to short-covering in the first instance and then lazy late money piling in to chase the market lest they be accused of missing the boat. I believe the market will re-test the all-time-highs set in the S&P500 and the Nasdaq. Before then we may see a modest pullback which will scare the late money who is only now joining the rally. That too will be an opportunity I think.
Personally I closed out the day by hedging my positions in TQQQ and SOXL to protect gains there. I may have to eat some losses in the hedges (SQQQ and SOXS) if the market keeps moving up; but if we get a modest correction then those hedges will generate some nice counter-trend gains.
In a moment we’ll get into the guts of the market - but before then I’d like to introduce you to our newest quant service.
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Alex King
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Alex King