Weekly Market Assessment
The stock market is the only market where things go on sale and all the customers run out of the store. Thanks Ro! Last Monday, the selloff from Friday continued however in a more severe dropoff to say the least. I woke up to the DOW futures being down over 1,000 points. Absolutely insane! I was a buyer in the early morning as Apple, Netflix, and JP Morgan were all down over 15%. I was looking to buy the best of breed companies that everyone wants but haven't had a chance to get them at the right price. Many believed the liquidity had dried up and that a flash crash may have occurred as well. Within the next 15 minutes, Apple rallied from $92 to $105, Netflix from $82 to $98 and JP Morgan from $50 to $60. Over the next few hours the market went from being down 1,000 points to coming within 100 points of being in positive territory. So a 900 point reversal in one trading day. This is a traders dream. Companies were trading at an extreme discount and at levels that may not be seen again this year. The volatility index (VIX) jumped to over 45 not seen since the 2008 recession, it gained over 100% in one day. I have never witnessed these types of moves in the market, and hope it's not a early hint to a black swan event.
"Markets in turmoil" along with "chaos in the markets" where flashing on every news station and almost every headline read something similar. With almost no chance to get out of a market in free fall, panic sets in. Investors almost become paralyzed as fear overwhelms the decision making process while there seems to be nothing but bad news surrounding them. What has been the catalyst to cause this selloff, everyone is pointing there fingers at China, as fears over their growth slowing have come under the spotlight. The government has intervened to further stimulate the economy and help stop the selloff in their equity markets. Systemic risk is creeping into our markets for now and only time will tell if we are going to be truly affected by China. However like so many times before these events pass as quickly as they came. In regards to China's growth, it cant be looked at as linear, there are going to be small bumps in its trajectory. The great investor Warren Buffett once said, "Be greedy when others are fearful." So when these companies that have a fortress like balance sheet go on sale, there is only one thing to do, close your eyes and just buy them!
The Rant: Going Off on a Tangent with My 2 Cents:
Making the Watchlist: Below are the stocks that I will be looking at over the coming months. I will provide the the current stock price and why I am watching them. I will comment on them as I continue to keep an eye on them. You will be able to see and follow their growth and/or decline. Chart links may be attached.
Netflix NFLX) $105.55- Has no exposure to China, however NFLX has followed this market down with a more than 10% haircut since hitting $117 last week. A break below $100, if the market gives it to you, will be bought and I will be looking to pick up options on any further downside.
See What I'm Trading:
You can now view all my real-time trades by following this link, BlackPacific Capital . This new site shows my trades, in real time the minute they are bought and sold. Below you can also click on the stock symbols, trade strategy or prices which will lead you to this new site. The site offers a full risk/return profile and video detailing the strategy of the trade. Note: When looking at the option positions every contract equals 100 shares.
From the Trading Floor to the Option Pit: A quick look at whats on the trading desk:
S&P 500 (SPX) -No Trades.
SPDR S&P 500 EFT (SPY)- To protect against any short term downside I have bought a weekly $191 "PUT" option.
(GPRO)- I bought a SEPT $42 "CALL"