If you think Tuesday’s stock market rally was a sign that the market is going higher, think again. Market action makes veteran trader Gary Kaminksy nervous, very nervous.
As you may know, Fast Money friend and former Neuberger-Berman trader Gary Kaminksy keeps his ear to the ground. And what he’s hearing is not bullish.
“I'm convinced the melt-up has peaked and I think at the end of earnings season you’ll see the market is exhausted,” he says.
He feels that Tuesday’s rally was not an upside bet on earnings but rather a very specific and very temporary bet on catalysts driving the market. They were:
- A relief rally after whispers suggested Citigroup results would be much worse than they were.
- A belief that the GOP candidate would win the special election in Massachusetts, thereby ending the Dems filibuster proof 60 vote majority in the Senate.
Although both catalysts are real, Kaminsky feels they are both fleeting.
Instead he’s watching the action in JPMorgan as his broad 'market tell' and Kaminsky does not like what he sees. JPM action shows 'how stocks that are over-owned and give-off even a whiff of caution can get sold pretty quickly.'
If that’s the underlying tone in the market right now – and Kaminksy says that is the underlying tone in the market right now -- there’s good reason to be nervous about other stocks, specifically Apple and Amazon, because both of those stocks are overowned, too.
"Everybody owns Apple; everybody knows there's going to be an upside surprise," he says. And that's just the environment that's ripe for trouble.
"I'm not saying the company isn't great. But when you have companies like this the stock is pricing in everything including a huge upside surprise," he explains.
And even the best companies just can't meet expectations that are this lofty, not even Apple.
But don't run out and short Apple or Amazon for that matter. Instead Kaminsky says play it with a short position in QQQQ. “I don’t want company specific risk; being short the Q’s gives you that visibility on the downside,” he explains.
And in case you're wondering Kaminsky is putting his money where his mouth is. He is indeed short.
Disclosure for Gary Kaminsky
Kaminsky Is Short (QQQQ)
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Trader disclosure: On January 19th, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (BTU), (C), (GS), (INTC), (MSFT), (NUE); Finerman Owns (AAPL); Finerman's Firm Is Short (IJR), (MDY), (SPY), (IWM); Finerman's Firm Owns (BAC), (BAC) Leaps; Finerman Owns (BAC) Preferred, (BAC); Finerman's Firm Owns (WFC) Preferred; Finerman's Firm Owns (MCD), (MSFT), (YUM); Terranova Is Short (CMA), (ICE), (ESS), (JCI), (CAL), (AGU); Terranova Owns (QCOM), (MSFT), (DELL), (AAPL), (EMC), (FCX), (FTO), (XOM), (BAC), (JPM); Terranova Owns (POT) Feb. Puts; Terranova Owns (XHB) Mar. Puts
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