Weekly Market Assessment
Just like that, we catch a bid! Well, for two days we did... and now we are in a major selloff. Welcome to life in the market... where uncertainty, paradoxes and contradictions make trying to understand it nearly impossible. Today, all markets are very much correlated. When our market sells off, questions like... Is this just a coincidental correction or is it the beginning of something bigger? Are we heading into a recession or deflationary environment? The list goes on and on when the market isn't moving in the direction that everyone wants it to, which is always... up up up! Was this a breather before we selloff another couple hundred points or was the 5-10% correction all we needed to head to higher grounds. Like so many times before, we look back and say, "Why didn't I buy on the dip?" One statement that helps explain the extreme difficulty of making a decision such as this, "Trading presents us with a fundamental paradox. How do we remain disciplined, focused and confident in the face of uncertainty?" Welcome to my life and those that choose to take on the task of figuring out the markets and managing risk. Another one of the most famous and well known sayings about the market is to "Buy low and sell high" ...so why does it seem so difficult to implement this elementary trading principle? I guess its like that other old saying..."If it was so easy, everyone would be doing it!"
On Wednesday we got the most recent Meeting Minutes from the Federal Reserve. As I have stated numerous times in my previous assessments, the Fed will not raise rates this year and these following excerpt from the Fed provides some further confidence in why a low rate environment is here to stay! The Federal Reserve goes on to saying, "Conditions for a rate hike were approaching"...."most judged conditions for a rate hike are not yet achieved," and my favorite which I always talk about is the "Federal Reserve revises down its inflation outlook..." Wow! So, even though we have had record low interest rates for over 5 years we still cannot create some inflation that would satisfy the other half of the Feds dual mandate. Think about that... The Dow has now fallen 10%, which technically is considered a correction to market watchers. This week alone we have lost over 1000 points. Crazy what can happen in just a couple of days. Has the correction that everyone has been begging for, finally arrived? For now like so many times in the past, it's time to start picking up companies that are on sale, as the Fed looks to have no choice but to keep rates lower for longer!
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.
Alibaba (BABA) $68.18- After missing on its latest earnings report, BABA has sold off more than 10%. It now trades below its opening IPO price and now looks like a buying opportunity. A falling wedge formation in terms of the technicals looks to be forming and with it at these levels it is attractive from a valuation standpoint.
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, however I ill be looking to buy "CALLS" Monday if we selloff any further.
SPDR S&P 500 EFT (SPY)- After a selloff on Wednesday and a slow recovery in the market I bought an AUG $208 "CALL" I sold this "CALL" option for a 67% gain.
United States Oil Fund (USO)- After WTI hit a new 6 year low I bought a AUG $14.50 and $14 "CALL" Still holding this and have added to the position.
Apple (AAPL)- I picked up a weekly $111 "CALL" option on Apple as it has sold off more than 20%.
LifeLock (LOCK)- I have bought more SEPT $9 "CALLS", as LOCK continues to be beaten down after the report from the FTC, however LOCK rallied more than 4% on Friday compared to the market which was down over 2%.