As we detailed in this week’s Tematica Investing, after yesterday’s rather surprising market rally there remains much political uncertainty as Candidate Trump is now President-Elect Trump and in 10 weeks President Trump. While a number of Candidate Trump’s policies are likely to stimulate the economy (lower taxes for businesses and individuals, infrastructure spending and defense spending) there are some unknowns including trade and healthcare reform.

While we think more details will assuage the stock market as Trump’s details become clearer, we run the risk of the devil being in the details for now. Also too, after yesterday’s unexpected stock market rally that saw the S&P 500 close within 30 points of its 52-week high, means the index is back trading over 18x 2016 earnings expectations that are growing ever so slightly year over year.

This combination has us remaining cautious near-term and as such we are keeping all three of our inverse ETF positions intact. 

Earlier this week when the market rallied following the news that the FBI would not be investigating Secretary Clinton on the latest batch of found emails, we were stopped out of our ProShares Short S&P500 (SH) November 2016 $40 calls at $0.30. With that, we were clear of any positions on the Tematica Pro Select List, and that affords us the opportunity to put some capital to work as we kick off the holiday shopping season.

We’re Adding Back a 2016 Holiday
Shopping Season Play

If you’re like us, you’ve noticed that grocery stores, the mall and even Home Depot (HD) have rolled out the holiday displays and it’s not even Thanksgiving yet. For the record, Thanksgiving is one of our favorite holidays here at Tematica as almost everyone has something to be thankful for. It also helps that it’s what we call a “food-focused” holiday, which is always a good thing.

We do realize that we are soon to be in the thick of year-end holiday shopping season and we’ve noticed that over the last several weeks Amazon (AMZN) shares have fallen 8 percent to close last night at $771.88. After Amazon reported it September quarter results, we were stopped out of our call option play, which was nicely profitable, and we shared we would look to revisit the play in the coming days.

With digital commerce slated to rival brick & mortar holiday spending for the first time every this season, we are making the following move in the Tematica Pro Select List:

• Adding the AMZN January 2017 $800 call options that closed last night at $19.80. 
• We would add the calls up to $23. 
• Following the market rally yesterday we described above we are setting a wide stop loss for this position at $10.00. 

Our intention is to boost the stop-loss position as we move deeper into the holiday shopping season as the underlying shares climb vs. current levels. Given the size of Amazon shares in the Consumer Discretionary SPDR ETF (XLY) that we have on the Tematica Pro Select List as well as, we’ll continue to keep the position in play over the coming months.

We’re up modestly in our Health Care Select Sector SPDR ETF (XLV) shares, but given the likelihood that President Trump will overhaul the Affordable Care Act and replace it with… something… it means the underlying healthcare stocks could be volatile over the coming weeks. As such, we are bumping up our protective stop loss in our XLV position to $68 from $58, which should lock in a modest gain if tripped.

SUMMARY OF ACTIONS FROM THIS POST:

• Adding the Amazon (AMZN) January 2017 $800 call options (AMZN170120C00800000) call options that closed last night at $19.80 up to $23 and setting a stop loss at $10.00. 
• Bumping up our protective stop loss in our XLV position to $68.