Stock Market Holding Pattern
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This is the weekly article and Pod/Video Show 39 – Stock Market Holding Pattern
October has been relatively slow so far as we head into the Presidential election mainly due to dealer gamma positioning and just a holding pattern for the election. There have been some moves which we’re going to get into this week but we’re going to review some of the reports notes this week in detail and what we’re waiting on next.
- Review some of the recent Core position ideas from Top Down Process
- Broad Market – Choppy/sideways action to continue
- China rug pull this week. More to come or?
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We publish the article of the week every Friday here on TheLongVol.com and then the podcast/videocast is on Spotify and YouTube.
Three main topics for today’s show – as always, a life update then:
- Articles of Interest from This Week
- Top Down Ideas Reviewed
- Broad Market Outlook – Choppy Action
- China Check In
- Q&A for The Week
Quote of The Week
Favorite Articles This Week
The Long/Short Multi Strategy Approach
Let’s review some of the approach and names we’ve talked about the last quarter on this show and some of the names in the report: $BABA / $VFC / $EOG /
- Idea development first
- Duration (expected time)
- Structure (equity and/or option structures)
- $BABA – Value (or value trap)
- Duration: Unknown
- Structure: LEAP calls 2025/2026
- $VFC – Turnaround
- Duration: Unknown
- Structure: LEAPs + Equity
- $EOG – Fundamental & Macro
- Duration: 3-6 Months
- Structure: Equity + options structures
Learn more about the FOPT/DeltaOne here – Must have a min. $100K portfolio to apply.
Broad Market Analysis
Nothing has changed much since last week – CPI came in inline and the rest of the stock market is in a holding pattern as of now even with new highs made on The SP500 this week. Most of this was expected and discussed in this weeks report which is why the focus shifted to Crude oil trading (great because it was down and up dramatically) meaning many names had flows.
We made new highs this week but it was nothing exciting likely due to election and dealer peak gamma making it tough to get flows to pick up. It’s always interesting to me to watch the day traders leave out context of markets/trading – everyday is not a larger move and some days/weeks there will be flow and others its dead. This week it was dead.
The highs made were weak and we’re still bullish but in our views it’s not the time to be adding new broad market risk. In fact, we’re close to a sell signal on our model and that likely comes around or post the election in November but for now choppy/grind higher broad market action is in the forecast.
Tesla: Retail Enriching the Dealers
The RoboTaxi event for Tesla was Thursday – as expected it was sold into and also as expected retail traders jumped into the calls and puts in size hoping for a big win on directional volatility. Whether or not this comes to fruition makes no difference to what we do but it’s an interesting piece of news from this week to highlight, again, the lack of understanding from the majority of market participants.
China Pullback
Tuesday we had a meeting out of China and there was not much said; the Hang Seng sold off dramatically as did many Chinese names, including Alibaba. As always, retail money is always late to the game and provides the exit liquidity.
- Saturday meeting
- Still not a believer there and not for us but if we can get $80-$90s again maybe my LEAPs trade goes back on in some of the select names
There’s not a 10 step checklist for this but there is a framework so that you can color within the lines – if you don’t have it use the report and let us do it for you.
Final Word.
- Report out this weekend Issue 41
- Open Q&A for the Show this week
- Choppy broad market action to continue
- Energy/oil likely to continue to trade in a wide range
Thanks for reading/watching/listening this week! See you Sunday for the report!
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About the Author
Daniel Bustamante is the founder, managing partner, and CIO of Bustamante Capital Management L.L.C., a multi-strategy investment management fir. He has over 15 years of experience in the financial industry, specializing in equities, futures, and event-driven trading strategies.
He is also the founder of TheLongVol.com, a blog and newsletter that shares his insights on his investing process, travel, and other private investments. He has been featured in Bloomberg, Arizona Business Journal, Business Insider, Yahoo! Finance, Forbes, Seeking Alpha, and other publications over his career on Wall Street.
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