September 13th, 2022

Is the Market Growing Stronger Or Is There Something Else Afloat?

Monday’s market move had nothing to do with market strength.  The Core CPI numbers are released today, so Monday’s price action most likely came from a weakening dollar.  That helped propel sectors like Technology to near the top of the relative performance charts.
Core CPI numbers
But let’s take a step back before we’re too bullish on Consumer Cyclical and Technology.
Let’s review short interest, or short float, which is the percentage of shares that investors are shorting relative to the total available.  Many stocks within the top two performing sectors have a high short interest.  So as the market goes up, it can force those with bearish positions to have to buy back shares, thus continually pushing up the stock.  So while that brings short-term gains, that doesn’t necessarily mean it’s time to load up on tech as a whole.
Meanwhile, there’s another group of stocks that are showing strength and those are the stocks we will look at for today’s trade idea.
Some of the discounters like (OSTK) and Dollar Tree (DLTR) are also up with the rest of the market.  Overstock is likely to retest its August highs around $34 – $35. 
Core CPI Numbers
Here’s a chart of DLTR after their earnings on 8/25.  They had a huge gap down and have been drifting higher since then.
Core CPI Numbers
Now, look at the call options.  There are 7,934 call options set to expire in a few days at the $150 strike price.  The current price is $145.75.
Core CPI Numbers
We could easily see DLTR drift higher by the end of the week. If it rises up to $150, we could see DLTR fill the gap and head back to the $160 range.
My short idea comes in the form of the iShares U.S. Real Estate ETF, ticker IYR. As interest rates increase, it will put pressure on the real estate sector and IYR could turn back around and come back to retest the $93 area. This may not happen right away – it could rise up to around $100 before pivoting lower.
Core CPI Numbers
We will get a better idea if we will have true market strength after the CPI data is released today.  We should get a better idea of how aggressive the Fed will need to raise future rates.  That said, the consensus is still a 0.75% increase in September. 
If you have any questions, comments, or anything we can help with, reach us at any time.
Phone: (866) 257-3008
Guest Writer, Filthy Rich, Dirt Poor
Editor, Wealthy Investor Society
Receive the latest news

Subscribe To Our Daily Newsletter

Get notified about new articles, special events, training, and much more

Send Filthy Rich Dirt Poor

To Your Inbox

Like What You See?

Leave your info below to get more options and trading ideas to your inbox

Yes, send me news to my inbox.