August 20, 2020

STOCKS – ZM
Macro – SPY 

August 20, 2020

STOCKS – MU, NVDA, GLD

MACRO – SPY, EWY

Mike’s Reading The Markets (RTM) Premium Content – NOW WITH A 2 WEEK FREE TRIAL

• Micron’s Stock Declines May Be Far From Over
• Breaking The Dollar – Morning Commentary Transcript
• Uptrends Still Holding For Now – Midday
• Uptrends Are At Risk
• No Yield Curve Control – Not Good For Equities
• It Approaches – Midday
• Memory Chips Sending A Warning Message?
• A Breaking Point Nears, One Way Or Another

ZOOM (ZM)

Do you know why a stock like Zoom was up 6.5% today? No, it isn’t because the stock is cheap trading with a $75 billion market cap. It is because there was a ton of options trading at the August 21 $285, $290, and $295 strike price. You also know something most of those calls were being bought. Do you know what it means? It means that there was a dealer out there selling those calls. That means they had hedged their risk out; you know how they do that? They buy Zoom’s stock. But you know what’s going to happen tomorrow, I’m willing to bet that at some point late tomorrow, the dealer who was hedging their position is going to start selling that stock because they are going to be over hedged heading into expiration. They will be long too many delta’s. That means, the stock will start going down, and probably even closes below $280, and that means the dealer gets to keep all those premiums. Thank you come again!

Just a hunch, who knows, maybe I’ll be wrong, I have been told flipping a coin gives better returns than my calls. 

Anyway, that is what today was all about. I’m curious to see how the Asian markets trade tonight.

Also, what was even more surprising was the actual number of stocks on the NASDAQ 100 FELL today! Yes, the NASDAQ 100 was up 1.4%, but the number of shares above their 50-day moving average fell to around 71%. Healthy market. 

Like I wrote this morning, the S&P 500 futures tested support at the uptrend, and it held. Again, as I said, you need to respect the uptrend. If it breaks troubles lies ahead.

One last thing, because I’m tired and have a headache, and my wife is getting on me to walk the dogs. Notice the equal-weight S&P 500. Notice that divergence. The market is not healthy. 

-mike