The Fed put is a very real thing right now. Fear of missing -- FOMO -- is very real right now. But so is lower crude and lower interest rates. We're three days deep into one of the biggest three-day rallies in history. Maybe I'm overly pessimistic, but today is not the day to buy. Today is a great day to sell covered calls, sell your stock and replace it with naked puts or bullish put spreads, or collar your stock to lock in some gains and provide potential upside.
The once quiet bulls on Twitter ( TWTR) are roaring again. I haven't seen this much confidence and open mockery of bears for well over a month. Hibernation is done. That's not necessarily a bad thing, because it should provide more of a two-way market over the next few months. That also means stock picking should be back in vogue soon. I've been mainly trading indexes and leveraged index exchange-traded funds -- intraday only! -- because correlation has been so high across the board. There has not been a need to go elsewhere. Heck, when you are seeing SPDR S&P 500 ETF Trust ( SPY) , iShares Russell 2000 Index ( IWM) , and PowerShares QQQ Trust ( QQQ) moving 3% to 5% per day, sometimes twice those levels, then you have plenty of opportunity for trades without single stock risk. That also means the associated 3-times leveraged ETFs are moving 10% to 30% per day. Yeah, there's plenty of juice there to squeeze.
Did I mention that's for intraday scalping-only for me? If you swing one to three days, then they can work as well. Anything beyond that and you're asking to get socked by volatility decay associated with the daily resets.
I think this rally could take the SPY into the $262 to $267 range before fizzling out; however, the downside appears to be around $242, so the short-term risk vs. reward appears to be tilting back to slightly more risk than reward in the current market. Of course, this is the first time we have real high-frequency trading/algo action working in conjunction with a bear market, a bear market bounce, and the Fed basically announcing it is willing to buy the entire stock market to keep it from going any lower. I do think there was a coordinated effort with money managers on Monday with the underlying tone of: We need you managers to buy this market hard Tuesday and the Fed will be doing the same all week. It paired well with Bill Ackman's sobbing warnings of market destruction ... right before he covered short and started going long.
We are seeing a dash for trash today, which is the other reason I think we're long-in-the-tooth. SmileDirectClub ( SDC) is up 33%. Every beaten down cannabis name is up double-digits with Tilray ( TLRY) leading the chart up almost 50%. Yet Amazon ( AMZN) is only up 1.5%, Apple ( AAPL) and Alphabet ( GOOGL) up less than 3%, Micron ( MU) , after strong earnings, is up 5%, but I would expected more with the entire market swelling.
There's no way I'd push short into this squeeze, but if you've enjoyed the run higher, don't be surprised with a little backing and filling after the squeeze ends and the end of the quarter portfolio rebalances finish, which should be today or by lunchtime on Friday.
Let's check out the charts of the N.J.-based utility.
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