Where Are The Holiday Season Trades?

 

The holidays are here, and they just keep coming.  Over the next 4 weeks, we’re going to wrap up 2023 and launch into 2024, and we’re all looking for that last possible push for the market.

Last week, I warned that I wasn’t too excited about the tech market.  Semiconductors were weakening, the broad market was consolidating, and a move below the 10-Day Moving Average could cause some serious concerns.  So, let’s look at the chart:

For now, it appears that the crisis scenario may have been averted – tech down a little, but not a lot is not the worst thing in the world.  Tech needed a breather after years of market leadership, and as investment professionals start looking for the value in the market, it may or may not be in the tech industry.  Perhaps that’s why we’re seeing such a big move in small caps, seen here with the ETF IWM:

Clearly, there’s some crazy choppiness here, but it’s generally from the buying side pushing small caps way up quickly, then sitting for a few days.  But for me, that’s not the big story.  For me, the big story is about the holiday season and what people are buying today.

People are buying stuff.  Holidays means for many a time for giving, a time for being with family and friends, and a time for spending money on them.  And it’s been good for retail stocks, seen here with the ETF XRT:

It’s been a wild ride for a sector that had generally been ignored for years, particularly as COVID nearly bankrupted many of the stocks that make up that index.  And yet, for some reason, it seems that the market is discounting the purchases made online.  Let’s look at Wayfair:

Over the last couple of decades, there’s been a major move from brick-and-mortar shopping to online.  And that seems to be continuing.  So why isn’t Wayfair benefiting this holiday season?  Is it already priced in?  Or is it because the value was in buying brick-and-mortar first?  Perhaps it’s purely technical.  And for me, I’ll run with the technicals – Wayfair’s stock halted at the 100=Day Moving Average, so that’s the resistance point I’m watching.  If Wayfair can get above that level, I see a potential for much more upside, and when I see much more upside, I think about leverage, and when I think about leverage, I think about options strategies.  So, I’ll have my eyes on my watch list, which now includes stocks like Wayfair and many others, and will continue to evaluate the broad market trends to find those potential outlier moves.

As always, go to http://optionhotline.com to review how I traditionally apply technical signals, volatility analysis, and probability analysis to my options trades.  And please, if you have any questions, never hesitate to reach out.

Keith Harwood

Keith@optionhotline.com

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