Watch out for the Bull stampede
7/16/23 Prospero.Ai (44th) Weekly Newsletter
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Watch out for the Bull stampede
For Tech: QQQ Net Options Sentiment > 40 = Bullish. < 30 = Bearish.
For Non-Tech: SPY Net Options Sentiment > 20 = Bullish. < 10 = Bearish.
“But we do expect QQQ Net Options Sentiment to remain Bullish overall for the foreseeable future. So it is important to watch SPY Net Options Sentiment for a better view of potential directional changes.”
QQQ returned 3.50% this week vs 2.19% for the SPY. Using the above quote from last week proved to be quite helpful. As the agreement between SPY and QQQ Net Options Sentiment in the Bull zone lead in a highly Bullish week. A perfect example of how you can gain conviction from our guidance.
We are in a downright exuberant market based on where the Net Option Sentiment readings are landing. Be mindful of any quick turnarounds in these metrics to signal there might be a change. And you should always make it a point to never get too comfortable. However, when someone expressed today they were “waiting for a dip to buy BABA” my response “I wouldn't trade that defensively anymore. My approach would be to buy some and buy more if it goes down.” If you like stock we wouldn’t recommend waiting out a dip anymore for now, you could be waiting a while…
This illustrates that point perfectly. You can look at these graphs and essentially understand that the market is pricing in hikes into next year. If you recall any of the Bullish forecasts prior to this AI run were predicated on getting rate cuts this year. That paints a very clear picture of just how big of a Bullish change this AI run is. But calling it an “AI run” alone is also a bit of an oversimplification. As much as it is that it is also a capitulation of the people shorting the market. Anyone saying we haven’t reached the bottom of the Bear market is pretty much extinct so opening new shorts is riskier and there is less downward price pressure in addition to the tech optimism. (especially focused on AI)
For Tech: QQQ Net Options Sentiment > 40 = Bullish. < 30 = Bearish.
For Non-Tech: SPY Net Options Sentiment > 20 = Bullish. < 10 = Bearish.
Bull Potential - PYPL (PayPal Holdings Inc)
All our signals are pointing in the Bull direction on PYPL so it is no surprise to see it at the top of our short term Bull watchlist in the app.
Bullish this week if:
PYPL Net Options Sentiment > 80
PYPL Net Social Sentiment > 50
QQQ Net Options Sentiment > 30
Bear Potential - SR (Spire Inc)
Overall the metrics point in a Bearish direction, the 68 Growth is higher than we’d want but one of the screens we run points very strongly as SR as a Bear here is the top 10 for Downside Breakout - Net Options Sentiment (higher the number the more Bearish)
AMC - 84
BOH - 82
EBTC - 71
HMC - 70
FRHC - 70
WSBC - 69
SR - 67
BYND - 66
IBOC - 66
PRK - 66
SR was the highest non-bank, non-meme stock. And sometimes our process is just that simple.
Bearish this week if:
SR Net Options Sentiment < 50
SR Net Social Sentiment < 60
SPY Net Options Sentiment < 15
Keeps - Staying as a pick but unchanged guidance
Bull review - META (Meta Platforms Inc) from 7/16 letter and Bullish this week if:
META Net Options Sentiment > 75
META Net Social Sentiment > 50
QQQ Net Options Sentiment > 30
META continues to show strength 6.31% this week vs 2.19% for the SPY. Since we started covering META 04/30/23 it is up 29%. We addressed on the 07/09 livestream if our signals “knew” about Threads, and the answer is yes quite possibly. Something like Threads is a big development undertaking and hard to cover up to Wall St. who are in the business of getting even hard to get information. The way institutions have been betting so heavily Bullish it is hard to believe at least some of them weren’t aware this was coming and its impact. Our signals continue to like META and TSLA more than any other stocks by a good margin. META Net Options Sentiment + Upside Breakout combine to a near perfect 199/200. Anything over 180 is a pretty simple buy and hold from our perspective.
Bull review - TSLA (Tesla Inc) from 7/16 letter and Bullish this week if:
TSLA Net Options Sentiment > 75 (this is adjusted 10 points up from last week)
TSLA Net Social Sentiment > 50
QQQ Net Options Sentiment > 30
TSLA continues its run. Up 2.53% this week vs 2.19% for the SPY. Since we started covering TSLA a 2nd time it 06/04/23 it is up 31.5%. This is a big week with earnings coming up but right behind META we have TLSA with Net Options Sentiment + Upside Breakout also near perfect 197/200.
Bear review - GLPG (Galapagos NV) from 7/16 letter and Bullish this week if:
GLPG Net Options Sentiment < 50
GLPG Net Social Sentiment < 60
SPY Net Options Sentiment < 10
GLPG returned 1.93% this week vs 2.19% for the SPY. It did underperform the market this week so no reason not to continue to see it as a great Bear pick. Especially longer term with a horrible Profitability (15) + Growth (16) = 31.
Bull review - CFLT (Confluent Inc) from 7/16 letter and Bullish this week if:
CFLT Net Options Sentiment > 70
CFLT Net Social Sentiment > 25
QQQ Net Options Sentiment > 30
CFLT returned 7.96% this week vs 2.19% for the SPY. Even as it continues to skirt the edge of our Net Options Sentiment guidance levels at 75, our patience with this stock has clearly been rewarded! We feel good about keeping it around for its Growth (72) story.
Bull review - ELF (elf Beauty Inc) from 7/16 letter and Bullish this week if:
ELF Net Options Sentiment > 70
ELF Net Social Sentiment > 50
QQQ Net Options Sentiment > 35
ELF returned 5.09% this week vs 2.19% for the SPY. ELF had a nice recovery both in price action and an improvement in many of the signals. Will keep holding.
Drops
FRHC is dropped as a Bear mostly because the banking sector is showing surprising resilience. It ended the week up .59% since first covered and a WIN beating the SPY by 4.40%.