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August 15th Daily Market Note: Markets face further pressure from Rates, China, and Banking downgrades.
🕑 Added 2023-08-15 18:40:56 +0000 UTCNote: A quick announcement - I am visiting Mainland China between September 14th and September 30th. Because of time zone differences and difficulty accessing U.S. websites, I will most likely be out of the office and formal publication schedule will resume when I’m back. If I can get in any periodic informal update (if the internet will cooperate), I certainly will.
To thank my Members for their flexibility, I will be hosting an Options Bootcamp (I am a Net Seller of Options) for all Members in early October. This live online event will be hosted in early October. For the public, the event will be $399, but for Members it will be completely free. Take advantage of the additional perks of being a valued Member and join our Income-Generating Community today with an annual subscription to get the best deal.
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Folks,
I am going to release this note to the public now that some of my views have played out and volatility is returning, so I wish to help my public readers.
I want to make clear that my Strategy is generally not as sexy as the plays that you see on Twitter. I am a Net Seller of Options, and my ideas take time to play out. The gains are not explosive, but they tend to be more consistent. Added up over time, small gains in volume can be quite substantial.
Rather than actively watch screens/charts all day, my approach can be considered to be a bit more passive as I let Theta Decay burn the options premiums that I have strategically decided to sell based on my DCF analysis of companies. These ideas are always shared with Members first. Public second.
Once I have the private group chat setup by Aug 23rd, Members can expect updates only when I believe one is necessary to give. Trading is inherently extremely stressful. Many times, the less you transact, the better.
As the S&P 500 has started to take a step back from its positive momentum, my edge against the market is starting to widen as I have been very patient and selective with my entries in new positions.
It is my sincere hope that even if the S&P 500 gives back all of its 2023 gains that I will help our Community preserve their alpha. I do not depend on the S&P 500 to go higher. It would make my job easier if the SPX continues its rally, but not necessary.
<figure>
</figure>Daily Market Note: August 15th 2023
The Chinese Yuan gets close to revisiting October 2022 lows, revisiting China growth fears
- Summary: Volatility via the VIX appears to be forming an intermediate-term base since late May. Bulls need the VIX to stay suppressed under 16-17 for the rally to continue.
Forward-looking Conclusions of this note:
- Macro: U.S. Retail sales continue to indicate a rather strong U.S. consumer backdrop while China data shows further evidence of sentiment weakening.
- U.S. Stock-Specific: Awaiting further opportunities. Previous stock-selection ideas are working well, but the markets may take those gains away if broad indices continue to weaken.
- Bonds: Previous views on Bonds stay unchanged.
- China: Once the Chinese Yuan (now 7.33) recovers back to below 7.3, China stocks will stabilize. This sector has incredibly large swings, so experienced participants should not be surprised by 15-20% moves (up or down) in a span of 3-4 weeks. No change in view.
Daily Market Note & Context
Overnight in China, we witnessed a rate cut in the PBOC’s (People Bank of China) medium term loans from 2.65% to 2.5%. This is the main rate at which the central bank lends to commercial banks, so lower rates has the intended effect to boost liquidity in the system as monetary conditions are loosened.
This policy move was most likely made in response to stimulating consumption and high-ticket items like Real Estate after the July’s macro data continues to come in soft. The resulting market move was a weaker Yuan to retest the 7.35 level (near October 2022 low), weaker sentiment across China Internet and U.S. names that derive a lot of their revenue from China (NKE/QCOM/AA/etc).
Back in the U.S., we continue to see slow grind distribution behavior across the sectors I follow, while the VIX continues to stay relatively suppressed. Oil & Commodity themes just made a first local top, banking themes are softening (especially our Downside Idea Goldman Sachs and Real Estate), and FAAMG continues to tread water.
I’m still not interested in the U.S. Indices at the moment and will continue to look for tactical bargains in stock-selection.
Previous ideas have demonstrated outperformance qualities at entries – most notably Oracle, MSFT, AMD. Additionally, our positive commentary on Travel has been a safe haven in the market as TCOM has outperformed most China Internet names and Marriott/Booking.com has outperformed most S&P 500 names. However, the market is going to punish all themes and spare no companies if the selloff gains steam.
Last week, Disney & Alibaba served their purpose for tactical trading.
Earlier this week, AMD/ORCL/TXN/MSFT Puts all collapsed 15-35% which gave Sellers a window of opportunity to take profits (if desired). Despite today’s broad market weakness, most of these names continue to outperform on a relative basis.
Once the market has further setups, you will be first to know.
Our cardinal rule: No setup? Then we just wait.
Good hunting is waiting. Impatience only leads to falling for traps.
Please remember I cannot advise on individual transactions – once positions are in profit or in-the-money, make sure to practice risk management that is suitable for your individualized situation.
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Disclaimer: My investment community is not investment, financial, or trading advice, but for educational informational purposes only. I am happy to share my personal opinions which I provide as my personal journal. Trading of any kind of securities involves a lot of risk. No guarantee of any profit whatsoever is made. Investors may lose everything they have. Practice extreme caution. No profit is guaranteed whatsoever, You assume the entire cost and risk of any trading or investing activities you choose to undertake. You are solely responsible for making your own investment decisions. Owners/authors of this publication are NOT registered as securities broker-dealers or investment advisors either with the U.S. SEC, CFTC or with any other securities/regulatory authority. Make sure to consult with a registered investment advisor, broker-dealer, and/or financial advisor.
