DailyPlay Updates – May 12, 2023

Investment Rationale

Stocks saw profit-taking yesterday, though once again, you’d never really know it by looking at the large cap SPX index, where the mega-cap tech names are holding this index up far more so than the equal-weighted SPX (the RSP ETF) or the Russell 2000 index of small cap stocks. They are meaningfully lower than the FANG-y led SPX. Right now, the unresolved debt ceiling issue is the biggest issue overhanging the market, and the closer we get to May 31 with no resolution, the more that investors will be hesitant to commit new capital to the equity market. Personally, I have little intention of doing much at all in stocks until month’s end if this situation is not resolved. A default on US debt is a messy situation all around, and it will affect every debt-issuing government there is.

Yesterday’s DP was getting long June 16th $112/$122.5 call spreads – the former strike being where the stock closed on Wednesday. The stock gapped up yesterday to open at $115.39, and in my view, it would have called for you to buy the $115/$125 call spreads instead. Nonetheless, the stock traded as high as $117.92, which means that the first of two upside targets I posted ($117.44) was already achieved in just hours – instead of days.

GOOGL – Weekly

I assume many of you put the trade on, and the portfolio will P&L this as the adjusted strikes because of the large gap up. I’ll keep you informed as time goes on as how to play this, but do understand that this is already at a place that if it took days or weeks to have gotten to, we’d be taking half off now.  Do as you choose keeping this in mind.

The Michigan Consumer Confidence number is out this morn, as are earnings from energy heavyweights XOM and CVX. Watch for the equal-weighted SPX to continue underforming the large cap-weighted SPX until there is a debt ceiling resolution.