Let me remind everyone what a bad idea it is to sell naked calls.
We don't do it.
I often want to do it.
Many times, it makes sense to do it.
But the answer is always no.
It's just not worth it.
Go ask around. The old timers will tell you.
"Don't do it kid"
But that doesn't mean that as a philosophy, we shouldn't approach the market with that sort of "naked call selling" mentality, at least for the foreseeable future.
Last week, we held our January Monthly Conference Call, which Premium Members can access and rewatch here.
In this post, we’ll do our best to summarize it by highlighting five of the most important charts and/or themes we covered, along with commentary on each.
Let's remember that throughout the 4th quarter we were going out of our way to be more aggressive than even we were accustomed to.
It was a different environment.
And while we did not know what 2024 would bring, we still don't, at least we came in with a good list of developments that would likely be occurring before a more severe correction was underway.
Remember, the new highs list peaked on December 14th. So that means we're over a month into a market correction that you can only see taking place underneath the surface if you bother to look.
Here's how each of the sectors have performed during this correction:
It was really hard not to make a lot of money last year.
And while the trends for stocks and many other risk assets are certainly up, we want to be identifying what the market will have to do for us to position ourselves much more defensively into the new year.
The first warning of a non-so-great market environment would be a breakdown in the Nasdaq100 and Small-cap Russell2000.
Look at those former highs in QQQ from late 2021. If the Nasdaq100 ETF is below 400, that would put it back below those former highs, increasing the vulnerability for further downside, or even a grind sideways.
As we always like to say around here, it's a market of stocks.
When we refer to "the stock market", let's remember that there are 500, or so, stocks in the S&P500. There are 3000 stocks in the Russell3000.
It's a market of stocks.
That's how we knew the market started to improve 18 months ago, because the list of stocks making new lows peaked in June 2022.
Even in the most recent correction in Q3 this year, the new lows list peaked on October 3rd.
On the other side of that formula is the list of stocks making new highs.
The list of stocks on the NYSE making new highs is the longest its been in over 30 months.
The list of stocks making new highs keeps getting longer. The list of sectors and industry groups making new highs keeps getting longer. The list of countries around the world making new highs keeps getting longer.
It's almost as if the market is getting stronger, not weaker.
And when you zoom out, you can see that this structural bull market remains intact.
We held our December Monthly Strategy Session last night. Premium Members can access and rewatch it here.
Non-members can get a quick recap of the call simply by reading this post each month.
By focusing on long-term, monthly charts, the idea is to take a step back and put things into the context of their structural trends. This is easily one of our most valuable exercises as it forces us to put aside the day-to-day noise and simply examine markets from a “big-picture” point of view.
With that as our backdrop, let’s dive right in and discuss three of the most important charts and/or themes from this month’s call.
