So, in the depths of the COVID gloom there was talk of a depression and stocks dropping another 50% from the lows. There was absolute conviction that you should not be buying. Now, after one of the most insane V-shaped recoveries we have ever seen, most analysts tell you to buy Apple, Tesla and anything tech-related as we have entered a new type of world. And yes, a V-shaped recovery… as most analysts say it isn’t happening, but it’s a clear V – as you see in the chart of the Nasdaq. Anyway, the consensus has swung from “don’t buy” when it was low to “buy everything” here and now? We disagree. We think it’s time to go risk-off.
We called the bottom and a long on March 19th, but on two occasions have called tops that were not to be. Our view has not really changed all that much and we strongly recommend staying on the sidelines here. Buying here is not a cautious approach to trading and if you have longs in some of these tech superstars, we recommend that you take some profits.
Investco QQQ Trust (Nasdaq ETF)
@MacroCharts on Nasdaq Breadth
Below you can see two charts. A handful of stocks named the Awesome 8 in the first chart, showing how they totally outperformed the market. In the second chart, Apple’s market cap that’s gone parabolic. Parabolic charts never end well.
Awesome 8
Apple market cap
What we are saying this;
Be very, very cautious. Everyone around you says it’s different this time. Know one thing, it’s never different.
For the brave lot, we have an option trade
Long a September expiry put at 275 and short a 255 put. (QQQ)
*Please note that these trade ideas form part of a larger weekly plan and the value of financial products can increase as well as decrease over time, depending on the value of the underlying securities and market conditions. The risk of loss arising from trading in Contracts for Difference can be substantial. You should carefully consider whether such investments are suitable for you in the light of your circumstances and financial resources.
Sources: Hedge Fund Telemetry and Twitter.
