Morning Look -Here We Go

I’ve been asking the question lately about how long this will last. Meaning, indexes at the highs, but doing so on very low volume and bad market breadth. The notion that we print new highs yet most of our P&L’s are blood red lately.

The U.S. futures market is pulling back by more than 1% this morning while the 10-yr yield trades lower by another four basis points to 1.28% in a risk-off trade. The S&P 500 futures are down 63 points and trade 1.5% below fair value. Futures tied to the Nasdaq 100 and Dow Jones Industrial Average both trade 1.4% below fair value.

Reportedly, investors remain worried about economic growth prospects due to labor shortages, supply chain issues, and the spread of the Delta Covid variant, although these were among the same concerns when the S&P 500 and Nasdaq set intraday and closing record highs yesterday.

Perhaps the reality of the Delta variant has struck a nerve today after Japan declared a coronavirus state of emergency ahead of the Summer Olympics, meaning the games will likely be held without fans, and The New York Times reported that the Delta variant is now the dominant strain in the U.S. as was expected.

Either way, there’s been a lot of talk about the market being overheated and due for a healthy pullback, even if monetary policy remains extremely accommodative for markets. Given the weakness in the futures market, there is apt to be concerns about extended profit-taking activity. The CBOE Volatility Index is up 27% to 20.60.

Here is what I’m doing.

We took stops this week on FUBO, NIO, ERX (all at gains), and a stop on CLNE for a loss of about $1.

So we are left with some longs. GDX, X, AHT, AAPL, MJ, EXPR. BBIG AND WISH. Some of these we have held for quite a while.

The problems are AHT which I am holding, BBIG is perhaps close to a stop this morning which I am also going to hold, and WISH looks like it will open below our stop which I will also hold.

Goldman has a $25 target on WISH and Peter Thiel has $1 billion invested in the name so I won’t let this weak open shake me out. But of course, trade your own plan if you are queezy about holding.

It’s correction time and we have been here before. This is where you get some value for your dollar, maybe not today but very soon.

I will keep you posted throughout the day. Hang in there.

I am around, so email me if you have any questions.

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