Market whispers - Time to B.U.T.T.?
Markets: Beachman's portfolio tactics based on his read of the markets
We, in the Beachman community, have been closely following the market gyrations over the past few weeks. In fact, on the daily, we have been discussing various signals and levels in the chat line here. If you have not joined the chat…please check it out.
During these turbulent market times, investors are asking themselves:
Will 2025 continue the bull market of the past two years?
Should we BTD (buy the dip)? Or BUTT (back up the truck)?
Options trading data has given us the best clues on how markets are likely to perform. Fri Mar 21st was the largest options expiration in history, representing more than $5T of open interest value or $1.3T of market maker hedging value. In Jan, these expiring options were at a 4:1 CALL to PUT ratio…a lot more bulls than bears. In late Feb, it flipped to a 3:1 PUT to CALL ratio…many more bears showed up. Demand for and prices of PUTs shot up, while CALLs became cheaper…traders leaned into the bearish side of the boat.
These massive PUT positions provided strong downside support for the SP500 at the 5,500 to 5,600 range. Markets kept testing these levels and bounced higher. Similarly, CALLs provided upside resistance at the 5,700 level. The index tried to climb above 5,700 no less than four times over the past 2 weeks. Every single time, it got rejected there and was punched lower.
So how did we play these air pockets?
We surgically BUTTed into certain stocks at the 5,500 level and trimmed to log gains when markets were toppy at 5,700. Rinse and repeat. We opened the year at about 20% cash, we BUTTed more than half that cash into markets and now after taking gains, we are back at 26% cash and again positive for the year, well ahead of the indexes.
Since early Feb, we have been warning that 2025 is going to be different. We have been talking about the massive potholes that are ahead for the global economy, for US companies and for the stocks that we follow. We, here in the Beachman community, have been navigating through and around these craters. You can find all my recent writings on these topics here.
This is not a macro driven economy anymore. This is, now, a news driven market.
As investors, this is not the time to F.A.F.O.
Our best pricing of the year, our Mother’s Day sale, is coming up in April / May. Now is the perfect time to try out our paid content for a couple of months so that you are ready to upgrade to an annual subscription when the sale pricing hits.
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Table of contents
Overall market conditions
Beachman recommends
Beachman’s portfolio stance
Important dates
Market signals
Bottomline
Overall market conditions
Trend: Holding lower 5,500 support, but stuck below the 200dma.
Risk level: Very high.
Investor sentiment: Extremely fearful.
Beachman recommends
Each week, I share a recommendation for an app, a book, a website, a podcast, a publication, a movie…anything that I find interesting and useful from an investing and financial management perspective. I don’t get paid to do this. Beachman’s Newsletter has and always will be an ad-free publication. So here goes…
DeCarley Trading
Carley Garner is a futures and options broker and one of the few commodity traders that I actually understand. Carley publishes an excellent substack and you can also follow her on Twitter. She does not write often, but when she does…it is worth a read. Her technical charts are some of the best out there. Jim Cramer often features her read on the markets during his Mad Money show on CNBC.
Beachman’s portfolio stance
70% long.
After surgically buying the dips recently, I have now been taking profits off the table.
Trimming and raising cash in line with my 2025 market roadmap.
Getting ready to establish my 2025 hedges.
2 trades in place (See current trades at Beachman’s Salty Trades).
Important dates
Mar 31st - Quarterly options expiration. Large JPM options collars expiring.
Apr 2nd - Major tariff decisions expected.
For short term trade ideas, check out Beachman’s Salty Trades.
On the daily, you can find Beachman in three places…
Beachman’s Substack chat line here
Beachman’s Substack feed here
Beachman’s Threads feed here
Please check out the must-reads listed on the About page and the Roadmap page.
Market signals
The SP500 has been holding downside support at 5,500 to 5,600. This support could disappear on Apr 1st because the large JPM collar PUT spread is expiring. The 200dma remains an upside barrier to overcome. This represents a 4-5% range.
The Nasdaq remains in a more precarious position with more downside risk and lack of meaningful support.
Small caps are also threatening to go lower. A very bearish death cross has now formed on the IWM chart…traders and algorithms will sell due to this formation. And the negative macro developments e.g. tariffs, consumer sentiment etc…is not helping.
The US$ (DXY) bounced off last week’s oversold levels and could try to regain the $105 level. That said, it remains in a downtrend as investor capital is leaving US assets, including Mag7 stocks and bonds.
The 10-year LT interest rate could ride along its 200dma around 4.25%. The US administration wants to push it lower, however if US bond sales are waning, then the 10-year rate could go higher. This is the most important leading macro indicator to watch right now because if the LT rate goes lower than the ST rate, then we could be heading into a recession…they are close to flipping.
Buyer interest in Bitcoin is dropping off. You can clearly see this in the buy/sell volume on the chart below (lower section). All bullish crypto news and developments have been sell-the-news events…insiders making money while rug-pulling retail investors. This is not healthy for crypto…investor sentiment will turn very sour any day now leading to another crypto winter.
What else am I watching?
Recession probabilities are rising…currently averaging about 35% which is 2-3x from last year. Recently announced tariffs could reduce US GDP by as much as -1.5% and raise inflation by about +1%. And the US Feds mentioned the growing stagflation (high inflation + lower growth) risk at their meeting last week.
Jobless claims continue to creep higher and new job openings are dropping…not a good harbinger of future consumer spending. So far this year, employers have announced more than 225k cuts, the highest YTD total since 2009. It is up +33% from the 170k cuts announced during the same period in 2024.
Inflation reports for Feb showed a stubborn, range-bound cost of living, cost of manufacturing and cost of services. These Feb reports don’t fully reflect any negative macro signals yet. So the Mar reports could be worse.
The US Feds are slowing down their QT (quantitative tapering) reduction of bonds on their balance sheet. Imo, this is a mistake…nevertheless, lower QT results in more market liquidity and more speculative trading.
Options expiration days are driving higher market trading volume. In the SP500 chart above, take a look at the 2x larger daily volume candles for Mar 21st, Dec 20th and Sept 20th. This Fri, about 21B shares changed hands on the exchanges. However the SP500 only added +5 points 0.08%. There is a tug of war playing out between institutional investors and retail investors. The former, including hedge funds and trading firms, are reducing their exposure to US stocks…as per GS, to some of their lowest levels since 2023. The latter, individual investors, are BTDing and FOMOing in, buying more than $12B of US stocks last week, as per JPM. BofA says that this was the 3rd highest retail buying week ever.
Bottomline
A few weeks ago, I wrote to my readers that the shit could hit the fan soon. Well, you all know how markets have performed since then.
This market remains bruised and it will take months to repair the wounds. Yes, I said months…
This is not the time to make major bets or one risks getting sliced and diced.
In fact, we now have a window of opportunity to better prepare and position for what could be coming ahead.
In the Beachman community, we have a plan and we are executing against it.
Cheers.
Good catch on IWM--