Happy Super Palindrome Day
02/02/2020. Kinda cool. According to my local news station this is the first time in 909 (also a palindrome, ha) years this has happened, last time 11/11/1111.
I didn’t do an intense Google fact check like the guys who check the political candidates do. So if that 909 years thing is incorrect, pat yourself on the back for wasting time figuring something out that only you care about on this lazy pre-Super Bowl Sunday afternoon. I know there was something about that it’s only true in the U.S., or Europe, one or the other, depending on exactly how the date is written.
But, the palindrome reminds me of the saying “two sides of the same coin.” Which reminds me of buying and selling, stocks of course. For some reason it always comes back to the market in my twisted head.
And, given the recent market action…what an interesting day on Friday…my thoughts are more on short selling than the generic kind. And short selling ALWAYS makes me think of my high school friend, Scotty.
Because he just couldn’t do it. Sell a stock short that is.
It’s funny. To me, any type of trade, or trading instrument, e.g. being long, being short, trading a warrant, or an option, or a stock, is like using a tool in a toolbox to build something.
A common stock could be a nail, and an option a hammer. Combine the two and I can build a house. You can think of the house as my portfolio, or just money. Building a house = making more money.
Being afraid of short selling, the way Scotty is, is like being afraid of a screwdriver. I guess you could stab somebody with it, or fall on it, but otherwise why would you be afraid of a tool you use to make money.
Maybe short selling is more like scissors for most people…”DON’T RUN WITH SCISSORS”. A lot of people probably have pretty serious psychological issues with scissors. Maybe selling a stock short = running with scissors.
Obviously the reason I’m thinking a lot about short selling is because we’re hitting another hiccup in “the market that will never go down”, say it in your best “Thou shall not pass” Gandalf voice, makes it cooler.
We hit such a hiccup late in 2019.
When the Fed said they were done being the whipping boy of the market…and then a month later, when it looked like “the market that will never go down” was going to drop like an elevator in a Die Hard movie (maybe like when John dropped the C4 and detonators down the shaft in the first one), Chairman Powell came running back, whip in hand.
This hiccup, and of course I’m talking coronavirus and its impact on the markets, may be a little more enduring.
Shockingly, the media seems to be (for the most part) responsibly reporting on coronavirus (tell me you haven’t tried to figure out some tasteful way Corona, the beer, can take advantage of this either), and not blowing it entirely out of proportion.
My favorite media ridiculousness these days has to do with weather reporting. “6 Million at RISK of SNOW”…in New England…during the winter…OK, if you say so.
As I heard on Friday, the virus seems to be the equivalent of a bad flu, but with no vaccine. Don’t get me wrong, it stinks if you’re in a country with a non-developed medical response to such things. But, taking it as a given that any virus sucks, we’ll stick to the market impact.
The impact will likely be, going by previous such events, relatively mild, but lingering for a decent amount of 2020.
Layer that onto a market that I believe is looking for some reason, any reason, to pull back a tad, and you get a day like Friday. And, what is likely to be a continuation of selling, on and off, at least to the next support level for the S&P 500 and the Dow.
So, where might that be?
My trusty support handbook tells me the S&P 500 is likely to drop to somewhere in the 3030.3 area. Get it? Palindrome, in keeping with the day’s theme.
So I’d expect another 6% or so in the next few weeks/months, or days if some really nasty coronavirus news comes out. No big overall move, but it does mean some much higher percentage drops in stocks directly impacted by lower global growth estimates.
Probably about the same 6% or so for the Dow as well. I’d keep an eye on 26,564 or so. (Sorry, no good palindrome there.) It does have some support around 27,435, but I wouldn’t be surprised to see the same 6% or so as in the S&P 500.
The point being, that those of you enamored of “the market that will never go down”, and let’s face it, who in their right mind could not be enamored with a 10 year bull run. May be in for some “I wish I knew how to do crafts with scissors” (and by scissors I mean sell short, remember, from just a few paragraphs ago) action for, who knows, a decent part of 2020(??).
So, if you don’t already have some form of short selling in your tool box, be it shorting common stock, buying puts, selling calls, arbing warrants, pairs trading, I could go on….you may want to sharpen those scissors just a tad.
A few warrants I’m watching right now include Vivint (VVNT, VVNTW), in a bit of a weird place as apparently the market doesn’t quite trust management to get the warrants exercisable before the stock moves lower. This one could get very interesting.
Virgin Galactic (SPCE, SPCEW). I’m still doing the “covered call” trade here. Stock was NOT impacted by the market meltdown Friday. When they report earnings later this month I expect a move in the warrant…pull the trigger on a Warrant Observer membership to see how I anticipate that one will play out.
GS Acquisition (GSAH, GSAHW), has a shareholder vote fast approaching…you know exactly how to play that, right?
And, the AIG warrants. When it breaks support at $50…which I think is becoming more of a WHEN than an IF, we’ll be making some money using…wait for it…SCISSORS of course, and warrants, and most likely options (of course we won’t be running with any of them in hand).
Oh, and CCCW and DEACW are also plays we’ll be trading.
Did I mention there is a LOT of warrant trading to be done these days?
Have fun out there, and remember down moves are ALWAYS faster and that warrants ALWAYS trail fast moves in the common, and some other important market sayings that I don’t have time to write down…gotta get some slaw to go with my Super Bowl barbecue…
You know where to find me…