After posting my latest newsletter Monday (12/31), I entered the New Year with a short-term bias for higher into NFP Friday – continued Santa Rally which started day after Christmas ironically enough – but weaker into earnings season. Here was my tweet – with sentiment/price targets detailed in client newsletter: USDJPY $108 to start with SPX $2277.
Just looked at USD-YEN carry trade for the 1st time in 2 wks. Wow.
I don't even see support until $USDJPY $108.
As for $SPX: $2277 has some support before ~$2135.
Doing my Intermarket Analysis newsletter for clients now + I gotta tell ya:
this market is broken not bent.
— Samantha LaDuc (@SamanthaLaDuc) December 31, 2018
Flash forward and AAPL just pre-announced BY ONE MONTH with negative guidance and fell 7% afterhours tonight. Suddenly, currencies were in some pain and USDJPY collapsed from $108.90 to $104.87 in a flash crash – and during a low-liquidity day when Japan’s markets aren’t even open until Friday. Unless by some rationale I do not yet understand, I suspect the ‘pile on’ effect by other cos that follow AAPL – assumed or actual lowering of guidance – will likely negate The January Effect and cause Tech to continue selling down into their reports, at which time I would be more inclined to nibble long. By that time, the earnings bar should have corrected with price and potentially set up a potential for a beat. But I’ll worry about this thesis as we approach individual company reports.
For now, I am trying to spy potential bullish triggers that could accompany/spur on a relief rally once this bad AAPL is done selling off and dragging ChinaTech with it.
Hedge Fund Armageddon. This could be bullish!
I read today 580 Hedge Funds shuttered their funds Monday. That’s the largest going-out-of-business-sale in this space since 2008. For some, that means opportunity:
“If you look at Q4, despite only a small drop in the S&P, it has been one of the most painful that my friends or I can remember. There are lots of guys down 20% to 30% this quarter and suddenly forced to de-lever further, to get their risk ratios in order. This sort of pain and indiscriminate selling creates lots of opportunities….Many of the companies that I am buying are down more than half this year—some are down a whole lot more. It’s the most exciting opportunity I’ve seen since 2016…I suspect that even if the overall market is down dramatically during 2019, the bargains of late 2018 will shine given their current valuations—especially as many institute buybacks to soak up the newly freed up shares hitting the market.Christmas has come early once again—at least in the stock market—I might as well take advantage of hedge fund Armageddon.” @AdvInCap
Equity risk premium reaches historic extremes. This could be bullish!
Dumb Money Bullishness reaches historic extremes. This could be bullish!
Two-Bar Reversals Today Were Negated. This could be bullish!
What Worked Well
The AAPL surprise will really test the market now. It will certainly test my Santa Rally thesis!
Wishing you a Very Happy New Year with less volatility!
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At LaDucTrading, Samantha LaDuc leads the analysis, education and trading services. She analyzes price patterns and inter-market relationships across stocks, commodities, currencies and interest rates; develops macro investment themes to identify tactical trading opportunities; and employs strategic technical analysis to deliver high conviction stock, sector and market calls. Through LIVE portfolio-tracking, across multiple time-frames, we offer real-time Trade Alerts via SMS/email that frame the Thesis, Triggers, Time Frames, Trade Set-ups and Option Tactics. Samantha excels in chart pattern recognition, volatility insight with some big-picture macro perspective thrown in.