LongVol Report Issue 8
Hopefully everyone is enjoying the 3-day weekend and are ready to get after it this week. I spent some time at the plantain/banana farm today, got a run in and finished working on the FPT training releasing in a few weeks.
So, overall, a really productive weekend and a needed break from the markets.
I am making this week’s members post free for everyone to read. (The actual PDF report will not be made available, but the video and the rest below that is normally pay walled is free).
Enjoy or don’t and hate from afar. Either way works!
Welcome to Issue 8 of The LongVol Report!
This week NVDA 0.00%↑ reports earnings which is more important than anything right now given that every manager has been chasing this and the tech names the last few months. I don’t have expectations for it but the SMCI 0.00%↑ blow-off top last Friday was cool to watch so secretly I am hoping this implodes as well (sorry).
S&P500: The $SPX has been in an area of concern for me, and I’ve talked about that for a few weeks in the prior reports. For those new here, I don’t really care too much about the S&P500 other than for sentiment and overall market timing for other stocks but when we get to technical extremes, I start caring more because of what I call “sledgehammer shorts”
Sledgehammer shorts: When charts, fundamentals and other items align to provide a trade where you can just size up and swing for it. As opposed to tactical trading around levels etc. I look for things on the charts in certain situations like this to help this idea called “open air” - where there are not much in the way of levels to impede the potential price move. Right now, there is potential for a lot of sledgehammer shorts, S&P included.
If we lose $5005 then there’s an issue this week and especially given, we have data on Wednesday and Thursday that may just happen. Regardless, if we stage a rally above $5066 you just won’t catch me long any beta and/or SPY 0.00%↑ calls. I’d rather sit it out and pick my spots to hit a larger index short, which, I think is close.
$4970 is a key area then below that this thing really opens up creating said “sledgehammer” short.
$NVDA: Everyone is going to try to trade this NVDA 0.00%↑ just like the options flow increased dramatically on SMCI 0.00%↑ last week; in my world it’s easier to avoid that until post-earnings because of one school of thought I use:
If you can generate quality long/short ideas, then you don’t have to tie yourself to one idea/asset or trade setup to generate P&L.
I don’t have a view on it like I said above but if they miss or guide negatively for any reason it’s going to be max exodus for the portfolio managers trying to track the benchmarks. We’ll get into this in DeltaOne Wednesday AM call, there might be a post-earnings vol play.
Homebuilder stocks - last July I had a special report for DeltaOne members on US homebuilder stocks. It was one of the biggest trades for me last year and Business Insider covered some of my thoughts on the sector then. We covered the shorts after a really nasty leg lower but what I said then was that in Q2 of 2024 that these might come back into play.
We’re nearly there in Q2.
The recent inflation data is not a sign for Uncle Jerome & Co. to cut here in anytime soon and once again it feels like managers/advisors are going to get caught off-sides. Not just in homebuilders, but in the market at large - it really feels like Q1 2020 again if I could put a finger on it.
Before you hit me with the “housing shortage data” - I’ve seen it. I don’t care (and didn’t back in July 23). Uncle Warren bought DHI 0.00%↑ around that time last Summer as well and I gave comment to Fox Business (where the BI journalist found me from) and said that he was probably right but short-term was wrong. He was, and this is not a victory lap, just more of a point that what he does is not what I can do; short-term 1–6-month positions are fine for me. My portfolio has to turn over so I can generate aggressive returns.
He actually just sold out of DHI 0.00%↑ - make of it what you will. Again, I generate my own long/short ideas; I am not reliant on following anyone else, so it makes no difference to me what he does.
Last week I posted something in regard to SMCI 0.00%↑ - on various ways to express a short. It’s the same with homebuilders; it’s all in how you express the view, the obsession with some market participants of trying to argue market moves is weird to me - it’s also weird that some of you care about what these mega hedge fund managers buy and sell. What I am saying is I cannot time this just yet, but it is on my radar and whether that’s a 30 day or 90 day short is left to be seen but the data is concerning me, and it made the full report for those who have access.
SMCI - I don’t have any thoughts. It’s crowded the IV is through the roof. Like I said, when you can generate long/short ideas across sectors you don’t have to be a retail NPC and chase what’s flashy on your screen.
Long/Short portfolio Webinar is Saturday.
Members. Some notes below and full PDF report.