I am early with the Weekend Update due to travel. Next week's trading signals will go out as usual, although commentary will be limited to an "as necessary" level. Next weekend's update will be up out on Sunday, August 19th. New Trades: FB Sell Signal; FB $180 Puts (Interim Alert incorrectly listed "$80") I have also been early on my forecast for a dramatic downtrend in the stock market. Being early is not necessarily a bad thing in this business. In mid-2005 Michael Burry was early as he started shorting credit default swaps and his payday, and it was a huge payday, didn't start coming until the 4Q of 2007, $100 million for him being early, and almost $1 billion for his hedge fund investors...being early. (Ultimately, investors in his Scion Capital fund earned a return of just under 500% between 2000 and 2008.) Who is Michael Burry? He is the subject of the book and movie, "The Big Short," a former resident neurologist who left medicine to focus on trading stock and bond markets. He was also a prolific stock message board poster (Silicon Investor), and then started his own hedge fund. But his real fame came when he correctly anticipated and then profited from the debt-based financial crash of 2007-2008. [Coincidentally, I started out as a lawyer, but then gave up the law to focus on my stock market trading. I too became a prolific stock message board poster and started my own hedge fund. Much like Burry in 2005-2007, I have been anticipating a destructive financial implosion in the global financial markets.] As FAANG goes... From William O'Neil, founder of Investors Business Daily: Another way to determine the direction of the general market is to focus on how the leading stocks are performing. If the stocks that have been leading the bull market start to break down, that is a major sign the market has topped.” 1. FB: Fell 20% on July 26, representing the largest one-day loss of market value in one stock in history. 2. NFLX: has declined from $420 to a low of $330 from mid-June to the end of July. 3. AMZN: Made a new all time high on Friday, after falling from 1880 to 1740 in the three days foliowing earnings on July 26. 4. GOOGL: Still in a strong uptrend, no weakness here. 5. AAPL: Like AMZN, siting on all time highs, the fist $1 Trillion company. All in all, a mixed bag of performance, but AMZN, AAPL and GOOGL bear watching in the days ahead. If any or all stumble as did FB and NFLX, that will be our sign that the generals are in full retreat. Under O'Neil's thesis, are FB and NFLX enough to suggest the stocks leading the market are beginning to break down? The Big Picture - Pattern Recognition The pattern recognition is ominous. It's not an exact timing indicator insofar as it won't tell us the day or even week of the top, but whenever it is, it doesn't look good. Open Trades There are 5 August trades that still have 7 days left until expiration, 19 September expiration trades (42 days) and one October trade (70 days).
