Up In (With) Smoke!

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Cheech and Chong

Nearly two years ago on our last trip to Negril, Jamaica, we spoke extensively with many of the locals who are extremely poor and always so happy to see tourists that do not stay in the All-Inclusives, rather booking the local hotels and eating in the local restaurants. Our friends there always ask us what we think it will take to help spur the Jamaican economy, particularly for the residents and not just the already rich owners of the super club hotels.

Without hesitation, we told them that once the US legalizes marijuana, the picture for them will change. After the midterm elections, that trend is clear. US now has 4 states with full legalization plus Washington D.C. Yet, besides a few penny stocks, nothing tangible exists for traders to invest in to capitalize on the growing popularity (and inevitability) here to legalize it.

Sure, you can try to get a license to grow-but talk about your red (green) tape! I’ve traded in and out of the Philip Morris (PM) stock several times in the last 2 years, but none of the tobacco companies have announced any developments in the pot business yet. Furthermore, the stores that sell Recreational pot are small businesses, nothing that is publicly traded.

What investors need to wait for: 1. Any tobacco or other huge companies with money for large distribution to make or even hint at turning towards the pot business (warehousing, manufacturing or distributing) 2. A conglomerate of small businesses that will join together cooperatively to form a publicly owned corporation. 3. Any hints from companies that sell and distribute equipment for the purpose of growing pot to emerge. 4. Food store chains that will carry and sell-Whole Foods-your stock went up over 11% Thursday-you game?

We told our Jamaican friends back in February 2013, that full legalization was 2-3 years away. Just in time for the next major election.

S&P 500 (SPY) New highs, lots of hype on the twitter stream about buyers of 215 calls last couple of days-no surprise given the shooting stars been writing about-unless this cracks 200.

Russell 2000 (IWM) Still consolidating, a bit sobering yet could also be flagging

Dow (DIA) Hello new highs again

Nasdaq (QQQ) Holding the runaway gap, but needs to runaway soon-for now, consolidating

XLF (Financials) Inside day at the highs-probably waiting for the jobs report

KRE (Regional Banks) 40.43 to clear now

SMH (Semiconductors) 52.68 the 2014 high with 52.00 pivotal, if breaks that a bit of warning.

IYT (Transportation) New highs here too

IBB (Biotechnology) Inside day which means has to clear 296.42 or still vulnerable

XRT (Retail) Money flowed here today after it held the 88.00 pivotal number I told you all about

IYR (Real Estate) If rates continue to firm, this could take a further rest

ITB (US Home Construction) Gave us the close over 24.26 we have been waiting for

GLD (Gold Trust) Pretty sick here but looking at SLV, a gap above 15.00 could get interesting

OIH (Oil Services) Could be trying to form a bottom

XOP (Oil and Gas Exploration) Hasn’t done that much yet, but inside day so worth watching

FCG (First Trust ISE Reserve NatGas) UNG was where it was at

TBT (Ultrashort Lehman 20+ Year Treasuries) TLTs if this begins to break further below 117.75, could be fate sealed for rates

UUP (Dollar Bull) Europe, here we Americans come!