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Monthly rollup | July 2023

Stocks Mentioned: Apple (AAPL), Nasdaq 100, PEPE, Carvana (CVNA), Salesforce (CRM), Datadog (DDOG), Broadcom (AVGO), Netflix (NFLX)

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July 01 2023

Bitcoin hasn't sold off in response to this news. If it can avoid selling off back to $26-$27k in the next week, that will be quite bullish.

July 03 2023

Time to buy Apple (AAPL) puts?

"This is ultimately a safe haven type of company for investors no matter the macroeconomy you're in," CFRA vice president and technology equity analyst Angelo Zino told Yahoo Finance Live "It's a name we continue to live and a name we continue to tell investors, 'Don't necessarily trade, it's a name you want to be investing in for the long term.'"

This was carried by Yahoo Finance on Friday, when Apple hit $3 trillion in market cap. This has all the makings of "Nobody gets fired for buying IBM", a catchphrase heard during the Nifty 50 bubble. Apple sales are going to have a third down quarter. Nobody is going to buy a $3500 AR/VR device in a recession. The 30% developer tax is going to come under pressure. There is no way Apple should be considered a "safe haven". I've read about such arguments only during two other periods - in 2008, banks were safe investments because they paid good dividends; in 2000, Intel and Cisco were about to change the world so valuation didn't matter.

There's a saying that crowds go mad all at once but individuals only come to their senses one by one. Puts are cheap before they come to their senses. Take advantage of this window.

“Economic history is a never-ending series of episodes based on falsehoods and lies, not truths. It represents the path to big money. The object is to recognize the trend whose premise is false, ride that trend and step off before it is discredited.”

- George Soros

You can bet your bottom dollar that the lemmings buying tech stocks now are not going to step off until they are handed 50%+ losses. If you need a history lesson, pull up the stock charts of the dot com buble leaders and see how swiftly they collapsed when the momentum chasers started coming to their senses. The bursting of this bubble will be equally swift once it gets going. Just a matter of when, not if.

If you're nervous about shorting bubbles, the safe trade is to buy gold. Gold is rejecting moves below $1900, showing signs of accumulation. All it would take to get back to the ~$2070 all-time high is a panic in the markets that leads to money flowing into safehavens. Treasuries are being oversupplied due to the TGA refill. The yen seems to be losing its safehaven status. That leaves gold to absorb all the safehaven buying. There are no slam dunk trades but if there were, gold would be it. My crypto portfolio is now heavy on Paxgold and I'm accumulating on a near daily basis while waiting for the bull flag.

The spread between the 2-year and 10-year U.S. Treasury note yields hit the widest since 1981 at -110.80 basis points in early trade, a deeper inversion than in March during the U.S. regional banking crisis. The gap was last at -108.30 bp.

July 04 2023

If you heeded my call to buy the crypto crash last month, congrats. I know very few acted on it because it was scary. I like to accumulate investments on dips, though I don't trade that way. I expect crypto to head lower (remember, it's still a bear market) but I'm not selling my alts here. The dips are for buying. We are at the tail end of a 2 year plus bear market. There will likely be one more cataclysmic selling wave before the trend flips bullish.

Dips and crashes in crypto should be bought. Stay cash rich and patient. I'm holding Paxgold as a cash substitute because I'm a gold bug at heart, but the principle remains the same.

Contrary to what the commission-based mutual fund salesmen tell you, timing the market is more important than time in the market.

July 06 2023

Last June was the worst month for stocks. Sure, the market bottomed in October but the scary looking charts, nearly every strategy ending the month down, happened in June. Now is it surprising that stocks are making new 52-week highs? Of course not. Statisticians call this the low base effect. Likewise, CPI hit 9.1% last June, a very high base. Is it any wonder that CPI is now "only" rising 4-5% off that extremely high base? Ignore the media spin. We are not in a new bull market.

Be it bonds, gold, oil, copper or really anything besides the Magnificent Seven and the AI bubble stocks, the market looks like it wants to crash. The quants and CTAs pride themselves on ignoring everything but the price action. They are still long tech, and they will be forced to jostle for the exit as nobody in their right mind will put a bid on these stocks on the way down.

If we don't test last October's lows on the Nasdaq with the market looking like this, the fundamental laws governing valuation and market cycles will be rewritten.

July 07 2023

A picture is worth more than me saying a 1000 times how bloated some of these bubble stocks are, in terms of their value within the S&P 500.

Yet the bulls will say this is The Exponential Age and Tesla is going to $4 trillion (no, not joking) so buy everything tech.

July 09 2023

New section added to my website, listing all my publications. From my very first job in Finance as an equity analyst covering Indian stocks, to my long stint at The Dollar Vigilante, to my private consulting work and collaboration with Jason Perz - it's all there. Feedback welcome. Also thanks for sticking with me and helping me grow as an analyst and trader. It has been a tough period since the Fed first started hiking rates but the worst is now in the past and the good times are right ahead.

July 10 2023

Data from FactSet published Friday showed S&P 500 companies are expected to report a 7.2% drop in earnings from the same period last year, which would mark the largest annual drop since the second quarter of 2020.

July 12 2023

US CPI rose 12.4% in two years

CPI rose "just" 3% in June

One headline says the Fed is way behind the curve on 'transitory' inflation even after 15 months of rate hikes and QT.

The other headline sends the algos into a feeding frenzy bidding everything up.

The crowd is not often wrong, but they are VERY wrong at turning points. This is one of them. This CPI print should reinforce the Fed's resolve to stay tighter for longer.

July 13 2023

Rounded bottoms are beautiful. This is the textbook setup to get max long.

July 14 2023

July 15 2023

The Everything Bubble is back.

Aviation and Japan currency-hedged equities were down 1.4%. Those were the biggest losers for the week. I have been researching and writing about markets since 2016 and I've never seen anything like this outside of crypto. This, folks, is how bubbles die.

I followed through on what I said and bought way OTM December puts on Datadog, Apple, Salesforce and Broadcom. If the rally continues Monday, I'll be adding Netflix puts as well. Carvana is an obvious short but that stock has lost all its rational investors and is basically the stock equivalent of PEPE. The easier trade is to avoid the meme stocks and focus on the low IV tech stocks when buying OTM puts.

My timing may be off but I've got too many things going on in my personal life to pay undivided attention to markets. Day trading the bubble on the long side would have been fun, and I did scalp bitcoin when I had the time. But the real money is made in getting the inflection points right, which is what I'm hoping to do by buying OTM puts. This is a trade I got right when I recommended it in February, leading up to the SVB collapse.

July 24 2023

Nasdaq weekly shows a rejection candle at the upper Bollinger Band. This bubble has surprised me in terms of both magnitude and duration so I wouldn't read too much into this. I'm waiting for confirmation - i.e. a classic Dow theory lower high and lower low on the daily chart - before I declare this bubble a bust.

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