SSS - Thoughts on the Short Side on the Day After the Fed Announces QE-to-Infinity-and-Beyond!
When the Fed announced "QEternity" back on September 13, the market's response was brief with only a few more days of upside before the market bgan to roll over in earnest on September 24. Flash forward to yesterday, December 12, and the Fed now makes an historic announcement that it will peg interest rates to economic growth and employment numbers. In the face of this "QE-to-Infinity-and-Beyond" announcement, the market rolled over even faster than it did after the September 13 announcement. This is not what one would expect in the face of such an historic Fed announcement that essentially says they will keep on printing until at least 2015. We also find the breakdown in gold and silver, which should be rallying strongly on the prospect of unending, somewhat ominous.
We are still focused on Apple (AAPL) as a primary short-sale target, and so far we've seen the stock fail to rally beyond the recent 555.20 high of five days ago, much less the 550 area. If the market begins to weaken here then we would not be surprised to see the stock retest its recent lows with the possiblity of moving even lower given the fact that ever more "trapped longs" keep coming into the stock. Short-sellers should be alert to any upside reversal here, but at this point we would use yesterday's close at 539 as a maximum "quick stop" if one is running a heavy position, or the 10-day moving average at 550.93 as an ultimate stop.
Google (GOOG) has weakened a little after a big gap-up open of around 2%, giving up half of that at the time of this writing. A high-volume reversal back down through the 50-day moving average would be cause to be aggressive in shorting the stock, although one could certainly probe the stock on the short side above the 50-day moving average if the general market situation remains weak today.
For those of who you subscribe to our weekly webinars, another way to control risk on the short side is via the short-term system that Gil Morales uses and which he has described in detail in recent webinars. This can come in handy on a day like today, especially in entering a short position on GOOG earlier this morning around the 709-710 level. While it is not a panacea it can keep one out of trouble in case the market does snap back at any point, something that is always lurking out there in a QE-to-Infinity-and-Beyond environment.
Fair disclosure: We are currently short AAPL and GOOG, but could cover our positions and take profits at any time depending on the action of the general market and, of course, the stocks themselves. This is a tricky environment, and one must seek to be nimble at all times, particularly on the short side.
This information is provided by Virtue of Selfish Investing, LLC (VoSI) is issued solely for informational purposes and does not constitute an offer to sell or a solicitation of an offer to buy securities. Information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of available data. VoSI reports are intended to alert VoSI members to technical developments in certain securities that may or may not be actionable, only, and are not intended as recommendations. Past performance is not a guarantee, nor is it necessarily indicative, of future results. Opinions expressed herein are statements of our judgment as of the publication date and are subject to change without notice. Entities including but not limited to VoSI, its members, officers, directors, employees, customers, agents, and affiliates may have a position, long or short, in the securities referred to herein, and/or other related securities, and may increase or decrease such position or take a contra position. Additional information is available upon written request. This publication is for clients of Virtue of Selfish Investing, LLC. Reproduction without written permission is strictly prohibited and will be prosecuted to the full extent of the law. ©2016 Virtue of Selfish Investing, LLC. All rights reserved.