I'm glad I'm short AMZN

First about the market. While the market price action is quite bullish and is making all time highs again, I think the market is setting up for a big decline in the next week or two. The recent bullish moves are made on quite thin volume and nearly all the momentum indicators are waning and negative divergence has shown up in all the indicators. And VIX has declined to the lowest point in a year.  This is not a bullish setup for a sustainable uptrend, at least now in the near term. That's why I think we are going to see a sizable cultput for VIX that is usually associated with a sharp decline of stocks.

One stock to short for me is Amazon. Yes, you hear me right that I'm shorting AMZN!! 

There's an old Wall Street saying – "buy the rumor, sell the news." Unlike a lot of things on the Street, this actually makes a lot of sense, and it can easily work in your favor. It's a cliché for a good reason, and it's nearly universal. In anticipation of some "event," be it an earnings report, a product launch, executive shakeup, a regulatory approval – whatever – traders bid the price of a stock up and up in anticipation of cashing in. Then when the event actually happens, those traders take that cash and run, sending the stock lower. They buy the rumor, they sell the news. Rinse and repeat.

Amazon's no different. Last year, Prime Day began on Oct. 13 – a day that capped an impressive 13%, one-week rise for what was at the time a $1.5 trillion company. After the big Prime Day 2020 event, with $9.9 billion fresh on the books… AMZN shares sank like a stone for weeks until the end of October. Traders did what traders do and sold the news. AMZN shares are up nearly 10% year to date and a little less than 8% over the past month. So Amazon's certainly coming into Prime Day 2021 in strong shape. The thing is, no matter how good the past two days' numbers are, history and momentum tell us it won't be enough to keep the rally going.

The real problem I can see about Amazon is its poor TA. While its price action is really strong to move higher these days, the uptrend is associated with consistent negative divergence nearly in all the timeframes, which suggests such kind of up move is not sustainable. My gut feeling is that Amazon is setting up again for a sell the news moment, following the closure of the Primary Day. Fortunately I have set up a couple of short positions in the past few days. Sure enough, Amazon is crashing today with a haircut for nearly 2%. I have taken partial profit and keep some shorts still in place. I think AMZN is moving towards low $3300ish in the weeks ahead.