Back to Work

It has been quite a week. We are betting by now you are feeling fatigue from getting inundated with election news and commentary, especially from countless pundits who accuse voters of bigotry or worse for not supporting a certain candidate.

Certainly, we want no part in adding to this madness. With that in mind, let’s get back to making money, because the one thing that is certain is the fact that the market actions over the last two days have created a lot of dislocations, and we want to take advantage of them.

These types of moves exemplify the idea of behavioral investing at its finest. Investors who blindly buy into sectors they think Trump’s election may help and sell off sectors he may not favor are clearly not using a sound investing strategy. Let’s face it: nobody can be sure what policies he and Congress will pursue and adopt.

With that backdrop, let’s get to the trades. When you receive this alert, please execute the following trades:

Sell the Proshares Ultrashort Brazil ETF (BZQ).

Sell the Proshares VIX ETF (UVXY).

Sell to close the iShares iBoxx $ High Yield Corporate Bond ETF (HYG) Nov. 18 $85 Puts (HYG161118C00085000).

Buy to open the iShares 20+ Year Treasury Bond ETF (TLT) Jan. 20 $129 calls (TLT170120C00129000) that last traded at $0.95.

Buy to open the iShares Emerging Markets ETF (EEM) Jan. 20 $36 calls (EEM170120C00036000) that last traded at 63 cents.

TLT and EEM represent two market areas that have been thrown out with the bath water. To give you an idea of the market’s extreme sentiment right now, both TLT and EEM currently are trading at RSIs (Relative Strength Index) of 20 and 30, respectively, when anything below 30 generally represents oversold conditions.

To be clear, perhaps at some point the fundamentals may change. But Trump’s election does not make any preconceived notions about what sectors may or may not benefit automatically come true. TLT and EEM are probably due for a short-term bounce and we want to be there to profit from it. As Warren Buffett succinctly said, “Buy when people are fearful and sell when they are greedy.” Right now, this view is hugely applicable for certain sectors and asset classes.