Nightly Briefing 9/1/20

We are seeing a sharper picture of the broad market. First, we currently expect no sustained crash and downturn prior to the elections. We will encounter 2-3 quick, sharp sell-offs that will be met with buying and equally sharp rebounds. These are dips to be bought. The market may not climb far beyond the September highs into the election, but it is not expected to turn down and enter a sustained correction. We have tracked bond purchases this week, both corporate and US, as well as repo injections. It is very clear that these markets will be supported - barring some unforeseen event - into the election.

But there is a chance the sharp 6-week downturn may start October 21st into the first few days of December. Even though a presidential election winner may not be announced until mid-December if the election is contested (we have many signatures suggesting a contested election), we expect big money to start buying in advance of the decision. Next week, from September 8th into the FOMC meeting September 17th, there is risk of some congestion and selling as nervous portfolio managers begin to set in motion their defensive pre-election strategies. That means selling and reducing leverage as well as placing hedges in the form of index puts. This pre-FOMC dip will be bought back up and rally into our September 22nd date. SPX 3,300-3,420 should hold this first decline.  Whether the rally into September 22nd is a new high or not is impossible to project as of today. Our system suggests a double top. The real first danger period comes September 28th- October 7th. This period is a major AI target. We expect a 2,000-3,000 point drop in the Dow, but it will be bought up back into October 21st. We will hone our targets as the time approaches. We alert members to possible danger periods so they are not caught off guard. Max extension into Sept 8th is 3,600 SPX with a minimum projection of sideways action into next Tuesday maintaining above SPX 3,500.

Metals should hold up until Friday jobs numbers are released. It is possible they start to decline prior, but not likely. We chose to de-risk our SILJ holdings today on this AM metals spike. Gold miners finished down for the day, but held the 10-DMA showing support. We expect a sharp pullback in the entire sector next week. We will dial in our October metals forecast late next week. We may buy the dip at the end of this next coming pullback.

No one could have projected the assault by certain government officials, special interests, and the media in regard to the COVID-19 outbreak. There are clear plans to increase Covid pressure into elections which will not be good for any Covid-sensitive stocks. Therefore, we are looking to exit DENN on its next spike. $13+ is the target we are waiting for.

We received a few emails today from members asking if they should “chase” or get back in on the next pullback and our answer is that we will not add it back to our short term portfolio. BLMN is currently a bad setup, period. Some bad set-ups will turn out to be winning trades. But that does not mean you should have bought them. This business is about passing on average opportunities, of which there are millions, for the above average ones. There is always another trade. We realize it is difficult to see BLMN up at $16 after having sold it 2 weeks ago, but we told members at that time at some point it would hit our target, and if you had a longer term outlook to sit patiently. It has moved more than any other restaurant stock the past week on no news. Short covering with the expectation of some Aussie Grill news is behind the rally. Mcdonald’s, Chick-fil-A, and Wendy's are at all time highs. They are Covid-friendly fast-food restaurants. BLMN was a $16-$18 stock for years until rumors of the company being sold last November surfaced. Only then did it break $20. Without buy-out hype, it will likely remain beneath $18 until a rollout of the Aussie Grill commences. The odds are unlikely that any public restaurant chain would be purchased in this environment. Golden Gate Capital, a private equity firm, sold its interest in Red Lobster in a fire sale days ago (smart move) to a Chinese-based seafood vendor that had already purchased a 20% stake in the restaurant. That deal went through for the simple fact they will unload all of their China-based seafood through the network of Red Lobster restaurants. The deal made sense. The upside for BLMN is $16-$17 until the Covid fear factor subsides. Even if it were to pullback to $13, it would be unlikely that we would re-enter. Is it a decent bet that it will rise into the coming year to $20+? Yes, but we have many other lower risk trades that don’t deal with Covid. In the end, if you pass on poor set-ups, you will make more money. BLMN has been good to us since the Covid crash, with HFZ purchasing it under $6 early on. It made sense back then.

We are still hopeful for a spike into Labor Day on X. Our bigger steel move may wait until after the US elections.

Crude oil, USO, remains on target for a September 22nd peak. UNG has a strong AI target for November. If you are long and have a built-in profit cushion, we would not even think of selling. It is too volatile for most people to trade, but if you have the stomach, stay long.

Applied Materials and Intel are two tech stocks that make their living from the semiconductor industry. As most members who have researched our long term portfolio know, we are very bullish on tech and semis into May 2021. Intel has lagged AMD the past 1.5 years, but over the last 25 years, the chip makers rotate and take turns being number 1. We expect a generation of new Intel chips coming out in 2021 to put Intel neck-and-neck with AMD into May of 2021, our AI target top. Applied Materials should be a steady climber into our May 2021 target and based on our forecast, should target $80+ alongside Intel. To avoid name-specific risk in the semiconductor field, we favor the SOXX index.


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Important Disclosures: Investing in the financial markets can involve considerable risk, including loss of principal. Past performance is not necessarily an indication of future performance.  Actual clients may achieve results materially different from the results portrayed.  All material is for informational and educational purposes only and is not investment advice and is not meant to suggest that any securities are suitable investments for any particular investor.  All information reflects our own actions, beliefs, and processes for purely informational purposes. HEDGE FUND Z LLC IS A FINANCIAL BLOG FOR THE SOLE PURPOSE OF EDUCATION.  HFZ does not represent themselves as acting in the position of an investment advisor or investment manager for funds that are not under their direct control and fiduciary responsibility. 


Third party quotes and information may not be representative of the experience of HFZ customers and do not represent a guarantee of future performance or success. Many of the results displayed on our website were achieved using leverage, such as 2x or 3x leveraged ETF's or equity options 


The information included at HFZ and HFZ writing, research, and updates is prepared for educational purposes and is not a solicitation, or an offer to buy or sell any security or use any particular system.  Information is based on historical research using data believed to be reliable, but there is no guarantee as to its accuracy. HFZ does not represent themselves as acting in the position of an investment adviser or investment manager for funds that are not under their direct control and fiduciary responsibility. HFZ will not provide you with personally tailored advice concerning the nature, potential, value or suitability of any particular security, portfolio or securities, transaction, investment strategy or other matter.  


No information, nor any opinion expressed on the Site or in the Services, shall constitute a solicitation or an offer to buy or sell any securities mentioned therein.  The information presented on the Site and in the Services has been prepared without regard to any particular investor's investment objectives, financial situation, needs, capacity, and trading ability or experience. Accordingly, you should not act on any information on the Site or in the Services without obtaining specific advice from your financial advisors and should not rely on information herein as the basis for your trading and/or investment decisions.  HFZ cannot claim or represent that any of our Services are suitable for you. 


By your use of the Site and Services, you're agreeing that you bear responsibility for your own investment research, trades, and investment decisions. Only you can decide whether or not a trade is right for you and you agree to be liable for any trades you initiate at your brokerage using research and/or tools that we provide. If you ignore our advice to do independent research and choose instead to trade solely on information, analysis, alerts or opinions found in our Service or website, you have made a conscious, willing, free, and personal decision to do so. You also agree that HFZ, its directors, its employees, subsidiaries, affiliates, and its agents will not be liable for any investment decision, trade made or action taken by you and others based on news, information, opinion, or any other material published through our Site and Services.  

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