For the second time in July, I called an audible today that took down risk significantly. I just finished going over the reasoning for the move with clients.
We took profits on positions in Zillow, Redfin and Tesla.
I had this week as having one day with inordinate downside volatility. Of course, there is a possibility that today was that day and the rest of the week will be up. However, FOMC days are typically torrid affairs, which is why I expected tomorrow to be the down day. I expect that tomorrow will take some digesting once the FOMC decision is announced and with renewed conflict on the Congressional front with respect to further stimulus, odds are that investors could be greeted with another down day tomorrow.
That is going to leave a bunch of investors who begin buying on hope of good earnings out of the army of mega-cap tech companies reporting on Thursday. However, the situation could be setting up, with two down days in a row, for continued sell the news type of price action. The low probability scenario I outlined in the weekend note could then come to pass, with some ugly action into Friday-Monday.
We have had a good month of July at T11, being up a double digit percentage for the month. There is no reason to take on this type of risk, when we could move into situational plays in the near future, while potentially avoiding forfeiting some valuable gains.
On a technical basis, there is a broad deterioration of patterns in tech that need to be resolved in a quick fashion either tomorrow or Thursday. What we absolutely do not wanna see as investors in growth is an expansionary move down from here. That would change things here over the next couple of weeks. We'll cross that bridge once we get to it, however.
If there is one thing this market has taught us in 2020, it's that moves have to be made on a dime. We can always reinitiate risk, whether through individual positions or leveraged ETFs.
That's it for tonight.
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