Rug Pull Season is here!

You guys know me well by now. I'm not exactly one of these fearmongers who spends decades trying to convince people that the next big crash is coming.

There are already plenty of those around.

I'm just trying to make money.

This is a very selfish endeavor for me.

Goal #1: Keep my money. I already have plenty. I want to make sure to hang on to it.

Goal #2: Turn all my money into even more money.

In that order...

There are different ways to accomplish these goals.

There are a few questions that need to be answered before proceeding as an investor of any timeframe.

These questions apply to longer-term investors, day traders, and everyone in between.

We're shorting bank stocks now too.

More details on that below.

But first...

Breaking News: "Dow Futures fell 100 points and the VIX rose this Friday on news of new all-time highs for the stock market"

The breadth continues to deteriorate with every week that goes by.

You notice?

You can see it in our trades as well. While the puts on our $SPY and $QQQ haven't started to work yet, the bearish trades on individual stocks are all either working or flat.

It's interesting. What you see in happening in the portfolio, you can also see happening in the market itself.

We saw new all-time highs this week for the S&P500. But we had the fewest stocks in the S&P500 above their 200 day moving average since December. And the fewest above their 50 day moving average since November.

Another day goes by in the market, and more selling came in.

Investors are making a habit of this whole selling thing.

You notice?

In yesterday's trading we saw the fewest amount of stocks in longer-term uptrends since mid-December. We also had the fewest stocks in short-term uptrends since mid-November.

You may not see the selling pressure as much at the index level, but for those of you who actually take the time to count what the stocks themselves are doing, you know.

Take a look at the new highs list, essentially non-existent throughout the month of January, even with the S&P500 and Dow hitting the highest levels ever.

You can also see the divergences in Consumer stocks, Small-caps and Emerging Markets currencies:

The market wasted no time starting to sell off in the month of February.

Remember, this is historically one of the worst months of the year to own stocks.

Also, the best 3 month period of the year (Nov-Jan) just came to an end.

So if stocks weren't selling off, that would be weird.

Stocks move first, and then the indexes follow.

It's a market of stocks, remember?

And while the S&P500 may have just had its 4th consecutive weekly gain of at least 1%, the stocks themselves are NOT doing that.

There's nothing like a good rug pull.

Especially when I'm able to make money from it.

This is the type of environment where they happen.

Some of our biggest clients are hedging their positions by buying puts.

Some are outright net short.

It all depends on what you're trying to accomplish as an investor.

Here are a few of the many warning signs we're seeing out there:

Look at High Beta rolling over last month, while S&Ps kept roaring higher.

Not to mention the Dollar strength we're seeing is off the charts. There's your divergence in EM currencies.

And of course, we've already discussed rotation into Consumer Staples:

February is one of the worst months of the year to own stocks.

Is that why we've been seeing all this rotation into defensive sectors?

Think about it, we haven't seen any rotation at all into Consumer Staples this entire bull market.

Until now.

And if you go back and study the history of bag holders, you'll notice that they love buying stocks when Consumer Staples finally start to become leaders.

This is classic rotation you see quite often ahead of a tough time for the market:

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.

I really like the risk vs reward from the short side here.

The divergences and rotation into defensives are finally there.

The Dollar has been strong throughout all of January.

That was the first heads up.

The new highs list peaked in mid-December on both the NYSE and Nasdaq.

So you can argue that we've been in a correction already, and that's it's just about to get worse.

And then here's what really did it for me.

It's the rotation into defensives that is the make or break for this bearish approach to the market:

I understand that some people are lazy and don't like to count.

I get that.

Also, journalists are NOT in the business of telling you the truth. The truth is just a commodity at this point, and that's no longer a secret. Word's gotten out. So it's either gross sensationalism or false information to get you to consume their content.

And then, of course, you have your standard charlatans who need to cherry pick data and manipulate anchor points so that they don't look as foolish for missing this entire bull market.

So what ends up happening is that if you're told something enough times, and you haven't actually done the work, you start to believe it.

"It's only Tech stocks that are driving this market"

Sound familiar?

But for those of you who actually take the time to look, you know it obviously isn't true.

The S&P500, Dow Jones Industrial Average and Nasdaq100 all went out last week at new all-time highs. Again.

We're now officially in Month #20 of this bull market that began in June of 2022.

We've seen some corrections along the way, and my bet is that we see more of them this year.

One could argue that stocks have already been correcting over the past 6 weeks.