End of Quarter Games! (June 26-June 30)
Happy Sunday everyone and welcome back to the Rippy Global weekly outlook. This week the market pulled back and finally broke the 5-week long green streak. This pullback seems healthy in terms of how much this market has moved into summer for the next leg up.
Fundstrat head of research Tom Lee states “‘[t]o us, this looks increasingly like an economy slipping into an expansion, not sliding into a recession…[a]nd this makes early cycle/risk-on positioning more appropriate.’”
Let’s see what this week has in store for us!
Last week, Powell reiterated the idea that there were likely going to be two more rate hikes before the end of the year and it’s possible that with another slow economic week, we see if traders will dwell on these comments. Powell had stated inflation was "more persistent than we've expected…” and with the next inflation metric on Monday, all eyes will be on it.
It’s also the last day of the quarter on Friday! This means we can expect hedge fund managers and portfolio managers to “window dress” their portfolios. What is Window Dressing? Well, the same way as some stores put their best products in their window to attract people inside, fund managers replace their losing stocks with some of their best gainers in order to look like they were overweight in those positions. Therefore we should watch some of the biggest gainers with high market caps to possibly increase this Friday.
Online, a new bear case for the market I am reading is about the rebellion in Russia and how this may impact the markets. As I write this, one of the most risk-on assets I know, Bitcoin, continues to climb higher. My personal opinion is that this news will not significantly impact US stocks just yet as it’s simply too early to know. If there’s escalation, investors usually de-risk into US bonds and back into currencies that will be in higher demand like the US dollar. Adam Kobeissi told MarketWatch “after all, the end of the war in Ukraine is the market’s top geopolitical driver right now, and if this increases the odds of a peace agreement and/or Russia withdrawing from Ukraine, it is likely to be perceived as bullish over the next few weeks”.
#1) In terms of earnings we still aren’t in the best season for those who like to trade them, but we have a huge consumer name reporting on Thursday: Nike. This will be very telling to see how customers are spending and will impact other consumer names, especially after Foot Locker had negatively warned the market in their report. Alex Straton, the Morgan Stanley equity analyst had stated that mass demand for sportswear in North America and Europe has slowed significantly.
#2) On Monday, Snowflake (SNOW) is holding an investor summit to look at the companies plans. The interesting part is that the NVDA CEO will be there and, as we know, Nvidia is a hot stock right now.
#3) On Tuesday, Delta (DAL) will give investor guidance. Out of all the airline stocks, Delta tends to have moved the most on these updates, so watch this for a play.
#4) On Wednesday at 9:30AM, Fed Chair Powell is participating in a forum on central banking where his comments may impact the market. Roblox is also participating in an AI discussion.
#5) On Friday, it’s the last day of the quarter so expect added volatility.
The S&P 500 ($SPX index) is cooling off after a strong run.
My key breaks are $4365 for bulls and $4315 for bears.
The best ways to play the S&P 500 are via. SPY/SPX options or SPXL (3X Bull S&P 500 ETF.
INDIVIDUAL STOCKS & LEVELS
Let’s recap some of the levels of some popular names:
Tesla has been consolidating with this inside day candle and has a gap to fill to $235, but also has had a lot of fuel recently. I want to see more consolidation for a cleaner move up, but the options flow is extremely bullish with ~43,000 call options traded to ~6200 put options on Friday.
Apple continues its slow grind up to new highs and it’s hard to ever short into strength, but the topics flow is getting more bearish as time goes on. I am going to stay away from this name due to these mixed signals.
The options flow had some huge trades in the 3X Bull Biotech ETF and if there is a more risk-on position in the markets, some smaller biotech companies could get deals so when this sector finally bottoms this ETF is one of the best to watch. This one is at huge support but maybe it can dip deeper into it for better entry.
In terms of insider trades, I do not see any huge notable purchases. NRDY had a super small buy (26,000 shares) and is about to breakout.
High Short Interest Stocks (MarketWatch)
#1 - CVNA 57% SI
#2 - ALLO 52% SI
#3 - BYND 46% SI (higher on S3 Data, can be a big mover)
#4- EH 45% SI
#5 - BIG 41% SI
Top Options Trades on Friday
Biotech Stocks Catalyst Watch
- ETON, REGN - PDUFA June 27th
- BHC, BLCO, TEVA, ALVO - PDUFA June 28th
Thanks for reading this weekend’s article, have a great week!
-Adit Dayal (https://twitter.com/tradelikehulk)