Nightly Briefing 7/9/20


Tech and the Nasdaq are heavily overbought from safe haven buying. NDX has been overbought for weeks and no smart trader would buy into these conditions. So do not be hard on yourself saying “I should have bought technology." The SPX is not chopped liver and should keep pace or outperform the  NDX in the weeks ahead. As Covid fears subside, Trump (desperately wants to stay in office) and Powell have a plan. Trust us, the hot money which flew into Covid-friendly tech stocks will start to be dumped and you won't want to be holding tech when that occurs. It may go through a multi-week period of congestion while other indexes advance and play catch-up. We focus on the bigger picture and expect higher prices into August. Day to day headline risk and gyrations are at all time highs, making the market very tough to call on a daily basis. But a steady trend will emerge soon accompanied by better headlines. The Covid death rate continues to drop every single week as more people are tested. If you're a fairly healthy person under the age of 65, you will soon have a stronger chance of getting struck by a moving vehicle or a bolt of lightning than dying from Covid. China’s economy and market followed the same rhetoric and news cycle for a month once they reopened their infected regions. China was always a glimpse into the future as to how Covid would play out, and their stock market is currently at all time highs. We are barraged with too much information on a daily basis and it becomes a difficult choice what to filter out. The US is too big to fail to a virus that gets killed with hand sanitizer and soap.


People have become increasingly frustrated with restaurant stocks the past 4 weeks. As markets rally they limp higher and as they decline they drop 4-5% in a day. Know this, the pendulum swings in both directions. In the near future, there will be days when markets are down and or flat and the beaten down names will greatly outperform the broad market. We've identified numerous possible triggers, amongst them under-exposed hedge fund managers seeking to deploy capital for the second half of July in beaten down sectors, a payroll tax break or tax write off of business meals for restaurants, or a new treatment for Covid that the mainstream media cannot dismiss. We don’t know with absolute certainty. But what we do know is the replacement cost of each and every site Bloomin' Brands operates alone gives the stock a $12-$15 valuation. Today Credit Suisse re-iterated a hold on the stock with a short term $12 target .

Buying at bottoms is hard. Looking back at past chart bottoms people always say “I should have bought back there, obviously." At major lows the optics for an investor are not pleasant. They see and hear doom and gloom and it looks like there is no end to the selling. Fear courses through the veins and puts a quick end to the execution of any prudent trade. When we bought the March 23rd bottom via TQQQ it was not east. We held our nose and bought because our system told us to. If you can give yourself a 60-day horizon, we anticipate serious gains will come out of DENN.


We have received many emails today on Virgin Galactic as many of our members own a position in it from our past alert. Today, 14 million shares of buying occurred in the first 30 minutes of trading on no news. We suspect it was a large short player covering in a hurry or a large fund taking a position. No matter who it was, it translates to good news for SPCE in the short term. The bad news is we did not want to chase price and had buys in our model portfolio under $18 after the gap up, but price simply did not retreat to allow us an entry. This happens often when a large move comes: the larger players don’t give you a chance to get in. We suspect there will be an event in the near future that will explain this buying but for the time being expect higher prices into tomorrow and Monday. This name has incredible long-term potential and has a cult following amongst its investors. It reminds us of Tesla in its early days.


We expect DUST to trade between 21-23 the next few days until a larger pullback occurs. Barring an event, lower prices are coming into early August for the metal complex.


Whether it's a spike on a specific event or a gradual rise, we are watching $44-47 on the December crude contract as a minimum profit-taking zone in USO.



ADMINISTRATIVE UPDATES:

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