Is he lying or are you lying?
Prospero.Ai 9/26/24 Trading Letter
Apologies but a lot of this letter will look similar to the investing letter other than our moves at the bottom :)
If you grew up in the 90's, or are an Adam Sandler fan you likely remember the movie "Billy Madison". One of the often-quoted moments of the movie that's now Gif is: "Is he lying or are YOU lying". The point of the quote was that SOMEBODY was lying. Both realities couldn't be true at the same time.
Even if you've never seen Billy Madison, that's an important question in today's market. Why? Because as of the writing of this letter, two opposing realties are happening simultaneously. One, QQQ and SPY Net Options Sentiment are rising to some seriously bullish levels. QQQ has remained in the mid 50's all week, but just jumped into the 60's. SPY Net Options has remained in the low 40's all week, but just jumped into the high 40's. Those are extremely bullish. At the same time, the market is showing more resistance upward. Who is lying, QQQ/SPY Net Options or the market trend?
In the past, when we saw that kind of jump in the numbers, we might have sold the farm and pushed all the chips to the middle of the table. But not so fast. As we've talked about at length, we have been experiencing a very volatile stock market environment over the last several months. One quote from a politician could send the market spinning. It's been extremely difficult to read how long the market can sustain a direction. So, in light of the two opposing viewpoints, we are going to remain cautious and play defense until the market truly shows its colors. Could we miss the run up on a green day? Yes. But at this point in the year, we'd rather miss a little upside, than lose a ton on a downward swing in a volatile market. Regardless, it will be a good test of Prospero's numbers to see what's happening here; after all, one of them is lying.
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