Reitmeist
er Trading Alert Commentary
Intraday Buy & Sell Alert
by Steve Reitmeister
Posted on 08/01/16 Sometimes the universe sends you messages and you need to listen. This morning I saw 3 fairly bearish articles that made me want to pause just a bit and realize that the bears are not done (see links to the 3 further down below). In fact, I expect them to dig in their heels around 2200…maybe before.
In fact, what if ISM Manufacturing at 10am ET today is a bomb? Then stocks won’t make it to 2200 before selling off. As such, I will be making our VIX trade now and taking one of our longs off the table.
* Sell all 215 shares of Dave & Buster’s (PLAY) for $44.25 or more.
* Buy 750 shares of S&P 500 VIX ETF (VXX). 4% allocation
Why Sell PLAY? I dug in deeper on Stifel’s 40+ page bearish call on the restaurant industry. They could be wrong…but they make enough good points that it will sour the group in the mind of professional investors making the stock group dead money until proven wrong. So even though I think PLAY is a unique property that will do well over time…this Stifel industry call will likely limit the upside potential for now and thus should be removed from our portfolio given its short term trading focus.
Why Buy VXX? We had a trade trigger in place for the S&P 500 made its way to 2190. However, given the trio of bearish notes this morning, I am deciding to enact this insurance policy now. It may prove to be completely unnecessary. But if the bears do dig in their heels at this level, then we will be glad we added VXX at this time.
Here are links to 2 of the articles I saw this morning that got me more cautious:
‘Sell everything,’ DoubleLine’s Gundlach says
Goldman Sachs downgrades equities to ‘underweight’ over three months
The 3rd alert came from TheDowTheory.com when they issued their August report this morning talking about the potential bearish signs they see in recent market divergence. Because this is a premium service I cannot give you access to the article. Just consider this note all the overview you need on the subject.
My goal is not to scare you. Or to re-ignite my bearish call from February. If I was then we would not have as many stocks and 3X long ETFs on the books. Rather, I am just becoming a little more cautious because I see there are some smart money players becoming more concerned at these levels. I believe they will be proven wrong in the long run because they do not fully appreciate the new Earnings Yield math versus other historical measures of market valuation. But in the short run, they could win a battle or two with stocks pulling back a notch from here.
Best,
Reity