11/16 Daily Market Note: U.S.-China Relations Attempt Modest Progress, though not enough to assure Buyside Fund Managers.
11/16 Premium Strategy Note
Note: Today’s note has the essence of a personal journal. This way, I can share my thinking during this market environment.
Hi Folks -
Yesterday turned out to be an inflection point for U.S. - China relations with the critical Biden-Xi meeting – just not the one I was looking for.
Many market-participants had started to warm up to the China internet sector by Wednesday of this week in anticipation of warming relations forming from this event. We were fortunately early with our Monday opinion and had decent entries to (somewhat) shield from today’s sector crater. My risk management system was rigid, and suggested that we were still mid-trend and there was still more modest upside ahead of BABA earnings. But a binary event developed in that Alibaba is scrapping their plans to IPO its other units, and along with Jack Ma deciding to sell a large stake in the company, this event poured cold water on a very promising sector setup for China. The unraveling of positive sentiment was fast, and my previous favorable China positioning has now turned adverse. While I am still ahead of the S&P 500 (~24% vs. ~18%), this give-back is pronounced, and this means all my guidance going forward will have to take an even higher degree of conservatism.
I did contemplate closing my China positions yesterday while I was ahead, but decided to wait for Alibaba earnings before doing so. This ended up being a (costly) trading mistake for me personally, and my focus now is how to reposition myself for the remainder of the year. In the future, I will be ruthless about taking profits in China if/when they appear. This event will be greatly remembered by me.
Let’s talk strategy about repositioning and the rest of U.S. macro which included important retail Walmart earnings today.