Don't be Complacent
According to my observations of the Fed over the decades, it has been my experience that the market usually sells off into the start of the meeting. Uncertainty over what the Fed might do or even say created at least some selling going into the meeting. Not this morning, the certainty that Powell will assure the market that the cavalry is coming is the accepted wisdom. There is even a stubborn 30% that is predicting that the Fed will cut this week. This is monumental complacency that will only result in disappointment. Just look at how the high-beta names are running, Amazon (NASDAQ:AMZN) is breaking $1,900 in the pre-market, as I am writing Beyond Meat (NASDAQ:BYND) is now up 28 points to just under $200 and Tesla (NASDAQ:TSLA) up over $230. One can justify nearly all these names pricing (except BYND), my only quibble is that these and almost all the high-growth names have shot up relentlessly. It looks like the market will sell off even if Powell says something benign; in order for this market to continue to run, Powell needs to come right out and get behind the tax cuts. One of the key ways of generating returns is not to lose money. One of the best ways to do that is to identify complacency. If everyone believes something, then everyone who wants to invest in that accepted notion is already there.
I won't belabor the point, but I think market participants will likely be disappointed tomorrow. I believe Powell will stay the course and not give in to the demands of the market to lower interest rates at the wrong time. Those who are like-minded to the way I see trading and speculation will trim positions and generate a cash cushion to fund buying in the coming sell-off
Adobe, The Trade Desk, Tesla
I have backed Adobe (NASDAQ:ADBE) for more than 5 years. It has grown into a rather large Cloud service stock with revenue growth a solid 20-30% YoY. It is trading 10% below its all-time high. My discipline says that if you are holding ADBE as a speculation, you should reduce your position going into earnings. If you are looking for positions to trim, ADBE should be on the list. The Trade Desk (NASDAQ:TTD) and TSLA have been specific names that I have designated as long-term speculations with similar good results, albeit in a relatively much shorter time frame. I recommended TTD in the $190s, it hit $250 yesterday, and TSLA is probably my most successful call in a long time. I called to sell it at about $300 and called for it to hold the $180-$190 level, which it did and I strongly got behind the name calling for it to rise 100 points over time. However, at this point with TSLA trading above $230, it seems swinish not to take at least a little bit off the table. I think this for both TTD and TSLA even though they have a lot more potential to the upside. I ask that you go through your speculative holdings and consider taking some profits. It is easier to sell positions when the names are rising, eliminate the stress of selling a position that was just 10% higher a few minutes ago and threatening to go even lower.
Loyal readers know that I pay attention to insider buying. It gives me insight into areas of the market that I don't know well, and it also gives me investment ideas. So here are some interesting insider buys:
Rupert Murdoch is spending $21 million into his legacy Fox (NASDAQ:FOX) media property. Could FOX be undervalued?
Two insiders are spending $6,000,000 at Guess (NYSE:GES). GES is a legacy jeans business, could they be restructuring or changing product and getting into growth mode? GES is still a recognizable valuable brand. I am not saying buy, but if you can understand the consumer and retail products, maybe it's worth a look.
Intra-Cellular Therapies (NASDAQ:ITCI): the Director bought almost $2 million in shares. I have made no secret that I know more than nothing about biotech, but this purchase caught my eye. I remember ITCI being a hot speculative biotech stock several years ago, shooting up to $60 and then flaming out in precipitous fashion. I can't help but wonder that something could be going on with ITCI.
Right now my position that Powell will not give the stock market or Trump what they want seems quite lonely. We will see soon whether I am correct. Don't be complacent.
Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.