Below please find subscribers Q&A for the Mad Hedge Fund Trader February 28 Global Strategy Webinar.
As usual, every asset class long and short was covered. You are certainly an inquisitive lot!
Q: Will we retest the 200-day moving average?
A: No, we won't. With the last test of the 200-day, we didn't even get to the 200-day, we just flirted with it. Moreover, there was a complete washout-not only from, all the short volatility players but, additionally, all the hot money in the market as well. So, I doubt we will get down to the 200-day again this year. Next year is likely, this year no.
Q: What is the next catalyst for a move up in the market?
A: Either a spectacular earnings report from a major company like Apple (and the next one is May 2), or news of the size of major share buybacks from companies like Google (GOOGL), Apple (AAPL), Microsoft (MSFT), Cisco (CSCO), etc. Some indication of news like that will draw more buyers back into the market.
Q: When will companies start buying back their shares?
A: They are buying them back every day. They're not allowed to buy back shares just before or just after earnings reports, but all of the Q4 earnings reports are done now, so we have a free run here for about two months where most companies are going to be automatically buying their own shares back daily. They're on auto-buy programs to dispel any risk of insider trading in their own shares. That's also why the largest share buyback companies had the largest moves in the last three weeks- Apple was certainly one of them, with the share up $31 in only two weeks.
Q: Should I look to emerging markets now? Is it a better value play than US equities?
A: Yes. I still expect emerging markets to outperform the US stock market by about a 2 to 1 margin. Buy the (EEM) on any dip.
Q: Do you think the infrastructure bill will get passed this year?
A: No, because it will require more deficit spending, and at a certain point the Republicans have to draw the line. We still have a large number of deficit hawks inside the Republican Party. If they do pass something, it will essentially be meaningless, (giving tax breaks for real estate developers or something of that sort). There will be no real impact on the economy or the stock market.
Q: What about LEAPS on NVIDIA (NVDA) and Lam Research (LRCX)?
A: That would have been a great thing to do on Feb 9. You don't want to do LEAPS - long term one-year option positions -??after stocks have just made 30% moves up, you do it before. You only do these at the very bottom of market moves. Because of their long duration, they can really get slaughtered when the stock goes against you.
Q: Is NVIDIA still going up to new highs?
A: Yes. My last bet was for a third double in the shares from $180 to $320, and we are already well on our way. The company is firing on all cylinders.
Q: Should I buy housing stocks?
A: They're still down from February...I would say yes. We see an extreme shortage in housing supply continuing for year, and enormous increases in new construction permits from the big home builders- like up 10% in a month; these are huge numbers. So, I'd have to think that the housing stocks like Lennar (LEN), Pulte Homes (PHM), and KB Homes (KBH) are going to come back big time.
Q: What is your TBT target?
A: I would say right around here I would be happy to take a short-term profit. You don't want to run the TBT for the long-term because it has a -6% per year negative cost of carry. It's a great short-term trading instrument, not a long-term hold. We now have a monster profit - it's just gone from $32 to $40, which is a 25% gain in three months. I'd take that and look for a better re-entry point later.
Q: If we missed the Currency Shares Japan Yen Trust (FXY) short position yesterday, should we go into it today?
A: Yes, but only use limit orders in the middle market. If you get done at your price: great. If not, walk away and just watch it. The fundamentals for the Japanese yen are as terrible as ever.
Q: If you had a choice between gold and Bitcoin, what would you take?
A: Bitcoin, never. It reliably brings us 70% corrections at any time without warning. Buy gold on the next dip. The bull market for the barbarous relic still lives, it's just getting a slow start.
Q: Is First Solar (FSLR) a buy even though it's not supported by the administration?
A: Yes. First Solar's business model is so strong they will be profitable no matter who's in office and whether there are subsidies or not. So, any dip on that is a green light. That's why the shares are up 200% in eight months. They are a back-door oil play. That said, there is some double top risk on the shares right here.
Q: Is Freeport McMoRan (FCX) a hold?
A: Yes, because copper will recover. Guess what electric cars buy tons of? We are moving to a copper-based transportation system. China's economy is also holding steady, which is another major factor supporting copper.
Q: Has your view on commodities changed over the last few months?
A: No, I still think commodities will outperform stocks this year- that view has not changed. You had a fantastic entry point two weeks ago. Look for higher highs now. Commodities are always big movers as we approach the end of an economic cycle.
With all that, I'll see you at the next Global Trading Strategy webinar on March 14 at 12:00 EST.
Good Luck and Good Trading!
John Thomas
CEO & Publisher
Diary of a Mad Hedge Fund Trader
