Fridays price action was pretty wild, a lot of names on my watchlist went vertical on heavy volume. The aggressive bidding then continued Monday morning in 24 hour trading across many stocks, in Crypto “fartcoin” leads the charge by a whopping 50%. This is the kind of nonsense and price action you often see in a blow off top.
Names like PLTR and many of SPY holdings now trade at very high valuations and yet market participants don’t seem to care. Instead they’re coming up with wild theories to justify it. The Vix indicates there is no fear left and the puts on SPY just keep getting cheaper. The money that’s been sat on the sidelines for the past 2 years may finally be getting some FOMO. All this would lead one to come to the conclusion that the top is here.
With that said, IWM still hasn’t broke into ATH, Biotech still hasn’t caught a strong bid, and a lot of sub sectors/names are still in their stage 1 bases. The market breadth isn’t actually “that” good.
So as far as I see it, time is better spent preparing and getting positioned for the next wave than trying to flip short. I feel it’s very easy to be bearish here if you look at current valuations, P/B, P/S etc and It seems a lot of people are, which is exactly why we could easily head higher (in small subsections). To be clear, being long SPY here seems ridiculous to me and is in no way a position I would take. I am also watching for a short setup in names like PLTR.
I am paying VERY close attention to XLE (Oil & Gas stocks), if those catch an aggressive bounce it’ll be an early indicator to trim a lot of other positions. I would also want to see Yahoo Finance post an article stating stocks are heading much higher, that’s when I’ll buy my first puts.
Themes in Focus: Robotics, AI Biotech and China.
I still do not believe for a second that China will perform poorly under the new administration. A lot of Chinese names are valued cheaply at current revenues & economic conditions. What a lot of naysayers don’t understand is when those conditions improve the current valuations would be too cheap, meaning, the market will at some point start its discounting mechanism. This will then place Chinese names on par with averages and that will cause the bearish thesis to flourish, which is when they will soar much higher. I am currently digging into every Chinese ADR as I’ll be looking to buy some for my Fat Pitch account.
In terms of Robotics, it’s of my belief they’ll be the biggest TAM of the entire AI theme by a leading mile. They are also too easy for retail and funds to get hyped about, positioning into such names should be the top priority. I’d rather take the loss than miss said theme and most of my time is spent researching where I’ll be placing those bets.
AI biotech like RXRX is sell explanatory, the reason to switch ARKG into RXRX was due to them playing a clear role in the entire sectors move. They are the IONQ play of Quantum and the RKLB of Space, meaning, they’re the easiest to understand and get over-hyped about.
I’ll be looking at the charts once premarket opens and the news begins to flow, will post findings then.
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