Market When Open - Monday 13 May

Market When Open - Monday 13 May
Roaring Kitty, Unmasked // Photo by Adam King / Unsplash

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Be Careful Out There, Everyone

by Alex King

Most probably, to the best of my ability and judgment, I would say the top is not in. I suspect there is a ways to go yet before the top-top. But the storm clouds are in my opinion beginning to gather on the horizon in anticipation of the next bear. I do not mean I think the markets dumps tomorrow or next week or probably not even next month, but I do mean that when you have retail FOMO money-destroying garbage games like Roaring Kitty / GME hitting the headlines again, and brokerages stopping small people trading such names several times in one morning, that is not a healthy, quiet bull market, that is the beginning of euphoria. And to quote our own esteemed @Frank, “only euphoria kills the bull”.

My best guess is we get some crazy volatility around Wednesday’s CPI print - remember volatile means volatile, it doesn’t mean only red ink - and after a fashion I think the market keeps moving up. If you had gotten bearish in early 2021, the last time hedge funds started chewing up retail on a grand scale with cray-cray plays like GME, AMC, various SPACs etc, then you would have either lost a boatload if money (if you went short too soon) or failed to make a boatload of money (if you went to cash too soon). The key for me in financial markets is to be ready for a change well ahead of time. So personally I have my own mindset set to, the recovery from the 2022 lows thus far has been driven by (1) the lack of rate hikes, (2) less importantly, the possibility of rate cuts, (3) the creation of demand for equities amongst late bulls by early bulls (first second-tier pro FOMO, now retail FOMO) oh and peripherally (4) earnings. The next move up I think will be largely FOMO driven and so I personally treat it as less dependable than the Q3 2022 to Q2 2024 period.

As always, the best thing to do to know where price is headed is, watch price. I remain very net long; in my ETF trading account I am market-neutral hedged in equities and bonds, with an unhedged long oil position, but this is (as explained ahead of time to our Inner Circle subscribers) purely a result of being maxed-out-busy this week and thus unable to watch CPI and react in real time. If I end up with some short-side losses I can deal with that, not least because in my other non-ETF trading accounts I am unhedged. If I failed to hedge that trading account and the market dumped on CPI, I would have only my own lack of preparedness to blame for missing out on some short profits!

With price only in mind, and without further ado, let's get to that daily market analysis. As always we cover all four primary US equity indices (the S&P500, Nasdaq-100, Dow Jones-30 and Russell 2000); bonds (TLT), volatility (the Vix), oil (USO) and sector-specific ETFs. We provide long- and short-term insight daily and we include coverage of leveraged ETFs which - if you have gotten sharp at the rotation and hedging methods we teach - can be used to very good effect. All of this features daily in the pay version of this newsletter.

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