The Closet Indexers

Turning over some rocks...

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This is the weekly article and Pod/Video Show 29 – The Closet Indexers

We’re in volatile markets and that’s a positive if you know how to navigate them – for most financial advisors and the average buy and holder it’s not a fun time. We’re going to dig into that this week – the idea that the market is more than just the SPY and the shiny object stocks. It’s an opinion that is not shared much to “normies’ – and without getting tin foil hat with you I’m going to discuss how to look at markets from a different perspective. 

New Readers Here. 

If you’re new here welcome, make sure to subscribe on YouTube and/or Spotify – you can get free daily market updates on LongVolReport.com.

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
  • Broad Market Discussion – Making money long/short & The Yen & Nasdaq Signal Hold the Key
  • Earnings Season Review ($PZZA/$CELH)
  • Q&A for The Week
If you are new here the article of the week comes out on Fridays with the show the same day. You can get a free 21 day trial to the report and AST Alerts portfolio here.

Quote of The Week

Favorite Articles This Week

Earnings Season: Generating Ideas

The heart of earnings season is all but done so let’s get into the approach I tend to look at when we are tracking companies in the report or for internal firm research. Earnings for us are a time to look at material changes: 

    • Is the business improving or deteriorating 
    • Are they guiding lower or higher 
    • What material changes are being made (buybacks/spin-offs/new products/new C suite execs
    • Are they issuing new shares/issuing debt 
    • Overall – how are the financials 

Things like that but not limited to that but let’s keep it simple. In episode 21 I talked about Papa Johns and Tap so let’s start with Papa Johns because we’ve been tracking it for near a quarter now. 

They finally found a CEO.

 

What changes we made? Let’s look at the earnings report. 

If you’re going to invest in a stock or trade into it with any reasonable size it’s best to understand the company, even a little research goes a long way and at worse you get to find more confidence in why. So, that when there is a technical shakeout you don’t get shaken out if you understand why you own it. – This is important and a piece where technicians fall short. 

Combining both can only help, or at least it has for me. 

Let’s look at what changed form earnings and then get to the chart. 

Tyson Foods – Swing Monitor | A New 52 week high amidst the market turmoil. 

Tyson has been a name in the report since last earnings and low $50’s. It was a trade into the recent highs then we decided to exit ahead of earnings – primarily due to a technical target reached and to lock in gains. 

This name is also not heavily tied to the indices so when we revisit the idea of “what do you think of the market” that question is not universally applicable, Tyson as an example. 

Again, some ideas can be 12+ months – Tyson at that point was not that, but it could be one now so let’s dig into the earnings. 

Combining both can only help, or at least it has for me. 

Let’s look at what changed form earnings and then get to the chart. 

If you are a Professional and need multi-user access, please email. 

Broad Market Analysis - We Called it.

From calling the risk-off in Mag 7 stocks over 7 weeks ago to discussing the Nadsaq correction before it happened, we’ve called it all!

  • From the over -40% move on SCMI lower to $NFLX to the entire mega cap space
  • Then there as our bear market correction call on Nasdaq before ALL OF IT STARTED.

 

The sell-off has been profitable for many readers. As mentioned last week, every time the markets sell off the generic financial advisor quesions come: “Where is the bottom!?”

That’s the wrong question– dip buyers of the market have been rewarded in recent years. It requires little to no research or work but a lot of hope and pray – this is the  standard financial advisor approach: AKA “The CLOSET INDEXERS!” (Sounds like a boy band!) 

That’s not what we do – we take a long/short approach at our firm. 

We also like research! There were many new names added long this week that are NOT the SPX500 related. 

Again, if you’re not accredited use The LongVol Report and  AST Swing Alert Portfolio as  an option. 

We had some great shorts coming into this week while everyone is arguing about market bottom, Sohm rule and other things that nobody really understands.

In fact, we were short some names (subscribers had a great week!) and then go long some names this week as well – it might come as a shock, but they are not $AAPLE or $NVDA – we do the research here as boring or as hard as it may sound….so we were waiting on some names to come in. 

 

The AST Swing Portfolio was on fire again this week. 

  • CVNA short closed +144% DITM (we love that!)
  • Dow Jones Short 
  • PayPal Long (again) 

If you don’t want to do the research or work, let me and my analyst do it. That’s what we do – we send the alert, the suggested size, the expected exit all you need to do is take it or pass. 

The Swing Portfolio uses deep-in-the-money calls and puts as stock replacement. The trades are usually 14 days but sometimes less in time and are lower volatility. 

This is a PLUS if you are working or just don’t want to do this full time like we do! 

We send you: 

  • The suggested entry and exit AHEAD of time
  • We send suggested risk sizing 
  • You pass or take

Let us do the work and you can watch the weekly show and get the full LongVol Report with our research so you can learn and make money at the same time. 

Great week all around.

If you are a Professional and need multi-user access, please email. 

Where to Next For Broad Market? The Yen Holds The Key....

Where do we go from here? (Again the wrong question but normies love narrative) – The Yen has to trade lower for risk asses (stocks to trade higher). It’s our view that even on a rally that it’s still risk off in the markets for a while – in short, The Closet Indexers are back for a reunion tour but it won’t last!

Again – we like making money here and so do readers of the report – we turn over rocks and find ideas where we don’t have to wait for Uncle Jerome to save us….

Whether they cut and get aggressive they have a problem. And if they don’t cut, they have a problem. But right now we need to see the Yen trade lower and for key technicals on Nasdaq to break through. 

In fact, we flagged this trade idea in the Special Situations section of The LongVol Report month ago.

  • The January 60C were up more than +300%!
  • More for experienced subscribers of the report but the report is DYNAMIC! 

Swing  Trades long/short with quality companies, momentum trading, “left for  dead stocks” and Special Situations like Yen long. 

The Yen holds a lot of weighting  right now for the market. We need to see this break down so that we can see the SPX500 and other risk assets rally. As of the time of this article the Nasdaq and SPX500 are balanced as a trade goes meaning….we are going to get resolution next week. 

My views are that we likely trade in a wide range on the markets and that there is no trend at least until September FOMC – this is a positive for traders BUT ALSO a positive for many of our names in the report that are SWING TRADES – again bad for the Closet Indexers Reunion Tour.

Positive for us: Bull market, bear market, recession, no recession, there is money to be made. 

Long or short, across all-asset classes money will always be made.

This excerpt is from last weeks report – Issue 31 is out Sunday.

I’m a portfolio manager and not a part of The Closet Indexers Band – so we invest cross-asset long and short to deliver returns (and I want to make our clients a lot of money). When we analyze the markets like this it’s because we’re trying to see where the best places to allocate money are.

If you’re a trader watching/reading and are using less than $25K this really is not important. Price patterns and a simple approach is probably best. 

Let’s break down what needs to happen on Nasdaq and analyze scenarios:

  • We traded sideways as we called last week
  • $18,700 will be key but Yen lower is as well 
  • Potential for a WIDE trading range (brace yourselves)

We need to see a sharp rally above $18,700 and that is a scenario to play out. Again, not our style to guess direction like that – but we will TRADE IT and money was made trading it. Others, they like to play the “is this the bottom game” = P&L baloons, peak P&L drops…it drops some more then your gains are gone OR you’re right and you can tell everyone you called it. 

But I’ll leave you with this – (I’m a movie fan) 

Just are there are no points for second place there are no trophies for market calls unless that trophy is P&L!!!

Again, at this point a September rate cut seems to be the case (I said that 2 months ago given some of the data) – the have the cover to do it. Again, does that matter to us, our clients and even readers of the report? Yes and No. 

Yes, because we believe inflation is only going to take off again if they cut. And if they cut aggressively, we have a problem. 

If they don’t cut? Doesn’t matter- we can continue to look at short-trading ideas and select longs such as $PYPL and others we sent out this week for the AST Alert Portfolio. 

 

If you are a Professional and need multi-user access, please email. 

Final Word.

  • Report out this weekend Issue 31 
  • No market call but ready for trading wider ranges 
  • Many names post-earnings may price higher – worth a look
  • A little bit of research goes a long way, especially when you can overlay technicals
  • Q&A for this week 

Opinion, not advice. Not a solicitation. 

Next Lesson

Dan

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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