Newsletter - 01/14/2024
Week in Review
From Schwab:
"The major U.S. equity indexes ended mixed Friday ahead of a three-day holiday weekend but still posted gains for the week, as favorably viewed inflation data was offset by mixed results from an initial round of quarterly earnings from big banks. The S&P 500® index (SPX) and Nasdaq Composite® (COMP) both advanced for the ninth time in the past 10 weeks. "
"Bank results were mixed, and that was reflected in the varied reaction in stock prices," said Nathan Peterson, director of derivatives analysis at the Schwab Center for Financial Research. "Net interest income looked OK, and investors were prepared for one-time charges related to the FDIC deposit insurance fund."
Greetings Family!:
The start of 2024 seems like someone decided to turn up the volume on crazy to "11." From the expansion outside of Gaza to the missile strikes in Yemen. Politics are a special form of crazy right now with the Texas National Guard standing across from the Federal Border Patrol. No, I don't think this is the start of a Civil War. It's too early for that. Then, Epstein's list is released, and I am amazed at how all those named have been arrested and . . . oh wait, that's right, THAT didn't happen. In comparison, the stock market has been somewhat subdued and that continued this week. While the market DID erase all of last week's losses in the SPX and came close with the NDX, there were things that I saw that support my view that the structure of the market is weakening (see below).
The Magnificent 7 were back to their market leading position this week but there were pockets of weakness: energy stocks, airlines and banks. My view is that only the bank weakness is telegraphing more trouble ahead. Energies are going to go up and I hold no opinion on airlines, mostly because behind banks airlines have received the most tax payer funded bailout dollars and therefore, I ignore them.
The "official" inflation picture was a mix with the CPI coming in a tick higher than expected but the PPI reported that headline wholsealse prices fell 0.1% in Deccember. For 2023 "official" CPI increased 1.8%, less than expected and below the Federal Reserve's target for inflation 2.0%. Of course, these numbers are complete and total bullshit. Do either of these support the "official" numbers?:
SPX and NDX Charts and Outlook
Markets powered higher this week with the SPX hitting a high only 16 points from the ATH and the NDX coming within 69 points of an ATH. I am still of the opinion that the market will test and take out those highs before it absorbs the first shock of 2024: it's not getting it's 6 rate cuts but it is going to get rate hikes by the end of the year. This will start the ball rolling and that's only if the upcoming Regional Bank earnings reporting isn't terrible.
SPX:
The SPX is in buy and should test the ATH Tuesday or Wenesday. If price does not close above the current ATH, that would not be bullish. The SPX needs to see volume come in quickly to drive price higher. If not, then a break of the lower channel level could establish a
good short setup.
But there are issues. First of all, Retail is ALL in but CTA's are not; yet. If CTA's do not join the party, It will severely reduce the probability of a blow off top.
Sesonality favors a move higher. Take note of the seasonal weakness in March.
NDX:
The NDX has the exactly the same setup. And I expect the outcome to be exactly the same: either volume comes in after the new high is made or the top will be in.
As I am doing with the SPX, I am using Weekly charts to provide me with strong confirmation of
trend changes.
This could become the setup for the down move, a large down move. But for now, the NDX is in long mode.
The following shows that unlike CTA's, ETFs are driving the long side also. Money is flowing into ETFs, which is the "magical put" that seems to be buying all dips. However, as I mentioned last week, the fact that invidual stocks are being sold supports my belief that breadth would enter the market. Seeing invidual stocks being sold tells me that there are sectors that are being sold. Sectors that we should put on our lists of possible future trades.
One of those sectors are Energy companies. But it's going to be a longer wait. First, the market has to accept that we have been in a "rolling recession" and it's not getting better resulting in a strong move downward, But after that, Energy companies are a sector I am watching.
Macro
Despite the insistent of the Federal Government that everything is awesome, I prefer looking at the data. And no, not the manipulatied data. The actual data.
Inflation is once again, "Sticky." Remember this is where the Fed was last January, whcih I called Bullshit on. In addition to the examples above, the following graphic should be concerning.
This chart indicates that the shipping rate for the Shanghai to Rotterdam sea route, which goes in the opposite direction of Gaza, rates are on the move. This is where products for Europe come in. This is a good example of being ahead of the experts and Fintwit. This is inflationary.
The decent Christmas retail reports were in sharp contrast to reports on X of empty malls. However, when the credit numbers were released this week it was shocking.
In the retail credit market, the bottom of the barrel is Buy Now, Pay Later. It is super risky lending. And it indicates to me that banks are so desperate for revenues that they will take on this level of risk. The end of the road is nigh.
What does this chart show?
If the answer you came up with is that money supply has fallen of a cliff to levels not seen since 1929 than you weren't paying attention closely enough. It is the rate of change of the M2 supply NOT the ACTUAL supply itlsef.
This is the M2 supply itself:
The Grey line is the M2 Money supply = stimulus/liquidity. Do you understand now how much bullshit money needs to be drained from the system? Do you honestly believe that the Fed is going to be able to withdraw significant liquidity from the without crashing banks and their stocks? And that's without CRE.
However, according to the MSM and Fintwit, everything is awesome and getting better every day.
The next graphic supports my belief that we are already in a recession and its about to get even worse. If the economy is improving then why is lending contracting? And at a rate that only the GFC can negatively surpass.
The economy is not doing better. The economy is worsening. You don't have to be a conspiracy theory person to see why reporting bad economic news during a normal POTUS election year might not be the plan, and this is not a normal election cycle.
It takes time for macro changes to work their way through the economy. And even more time for those changes to reflect in their stock prices. Expecially in the stimulus induced high that the current market is in.
But the pressures are mounting significantly.
DOOM List Update
DOOM 1: CRE IMPLODES:
Banks reported earnings and while they generally were bad, they did not reveal significant losses due to commercial real estate. However, reports of CRE issues really grew sharply in December of 2023. I'm waiting for the first bank / Private Equity / REIT to implode out of the blue thereby ending the "pretend and smile" phase.
And then there's this interesting nugget:
Here's the Fed telling us that they are helping institutions get ready to deal with unrealized losses. That's just the nationalization of banks.
DOOM 2: JAPAN GOES FULL KAIZAN
Nothing new here except recent strength in the Dollar continues.
DOOM 3: GAZA EXPANDS
Sadly I can check this already. With the IDF massing forces in the north, the U.S. bombing the Houthis in Yemen and the bombing of the U.S. Embassy in Iraq, the regional war now involves the EU, Australia, Bahrain, Canada, the Netherlands, Saudi Arabia.
The markets reacted with a yawn to an event that would normally send it down at least 1%. Same as it's been for over a decade.
DOOM 5: NATO AND RUSSIA ENGAGE DIRECTLY:
It appears that the U.S. is expanding it's "Who wants to go to war" Tour by bombing Yemen. At the same time, that idiot maniac Lindsey Graham is calling for strikes against Iran. Iran gets its weapons from Russia as well acts as it's proxy. If Iran gets bombed, the chances of NATO and Russia facing off grow. A lot.
DOOM 6: TERRORIST ATTACK ON US SOIL:
Sadly, it appears that this is ineveitable also.
Doom Trades
$KRE
While I was waiting for the $50 level to be tested, the retrace this week provided pricing that I found was attractive so I added another 10% to my DOOM trade. I have 5% of my total portfolio remaining to allocate. I held that back in case banks participate in any blow off topp.
$BAC:
The Weekly confirmed a reversal. That makes this a valid trade also.
$TQQQ:
Was watching the retrace this week. Well it nullified any down move and put the NDX back in up mode. Still waiting.
$TLT:
AS I said last week, I waited for the retrace and entered a non-DOOM shorter term trade.
How Those in Power Screw Us
Example #1 this week is this graphic. For only the second time and at a record level, the U.S. Treasury LOST money operating. How the flying F can they possibly lose money. It's like the house in Vegas losing money. And it's your money.
Wait. Isn't Russian oil under an embargo? And NATO is made up of European countries largely.
So, NATO members are providing money to Russia? I thought they were the enemy?
Yes. They are dumb enough to try it again. Look at who it is: the World Economic Forum.
Bitcoin is Done
Jan 9th:
I posted on X that the first piece was in place for the price of BTC to be manipulated.
Jan 13th:
Signing in to TOS I had to agree to a new disclosure - one for Leveraged and Inverse ETP Futures linked products.
The second piece is now in place.
BTC is no longer a free trading market as the necessary structure has been put into place to maipulate it using derivatives.
One day before BTC hit an ATH of $49435 I made the following comment.
BTC closed art $43425 on Friday, just three days after I made the following comment.
Because I have a logical reason to believe that BTC is being artificially driven down I am still of the opinion that BTC sees $50k before it sees $30k. I am still bullish BTC based on the current structure: increasing demand and decreasing supply production.
But, BTC is no longer outside of the grasp of the really terrible people: Blackrock, JPM etc. The can create arbitrages, legally.
For example, they could sell enough BTC futures over the weekend to create a price gap for the cash open of the ETF, which they would have gone short on Friday, closing it for a nice profit Monday AND buying back the short futures for a profit also. Rinse and repeat. And that's just one simple way. They will create incredible ways to get the job done. The BTC purists will regret the day that "acceptance" in the form of ETFs was delivered to them as a victory. It's one of the most blatant trojan horses that I have seen.
NEW FREE TRADE IDEA
I did not do any free trade ideas this week.
UPCOMING WEEK:
VIPS:
Meeting this Sunday at 5pm NYC.
FREE MEMBERS:
Free Session Tuesday at Noon NYC covering: Trading Psychology
CLOSING COMMENTS:
This next week should prove very consequential regarding market direction. With earnings season in full swing I will be looking at some earnings plays.
For those of you in the Bitcoin miner trades, take a look at this chart. It shows what BTC did 9 years ago today.
BTC crashing to $150 from $265. Then it went to $20k.
I am humored but not concerned. Why anybody would be concerned knowing the parties involved makes no sense,
I am looking forward to the next week of trading and resolution directionally. I also will continue to monitor BTC and the unfolding drama there.
I hope YOU have a great week and I hope our paths cross this week!
-theBoss
My Ultimate Goal
I have shared with a few members what my ultimate goal is for this whole endeavor. I think it would be good for everyone to know.
Beyond simply teaching people how to trade, these are where I want to be in one year:
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100 active traders. Not for collusion but volume often attracts other volume.
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2 to 3 program teachers.
And the final goal?
To create a hedge fund with the top 20-30 traders. I can raise money. I want to show Wall Street how much they suck. I want to show people how it can be done. Change the world.
Things I'd Like Your Opinion On
I am also considering doing some or all of the following. I would love your feedback via dm or email of what you think.
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Daily end of day short (15 min max) podcasts you can listen to.
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Doing One vs. Ones with other FinTwit people who have opposite views than mine and debating them.
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Holding a Fall Retreat in Vegas; I'm buying dinner and I will negotiate special accommodation rates (I know this guy).
Paid Memberships:
ALL OF THE LIFETIME VIP MEMBERSHIPS ARE GONE! But I am still running a special on VIP memberships and VIP Trial Memberships have been discounted to $99. VIP Trial memberships give you the chance to try out all the VIP benefits such as real time VIP only trade ideas, VIP only chat where we discuss trade ideas, and a one-on-one meeting with me.
See what others are saying:
MERCH STORE IS OPEN AND LIVE!
Don't forget the Discord live chat is STILL FREE but it will be closing to new members soon. In fact, we have already started removing non-active members.
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In the meantime, come and join us - its the best community out there: Discord.
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Also, be sure to check out the new page for Daytrading on the website, run by the fine gents @BaconTurkeyClub and @Juggernaut. If you ever wanted to learn or just watch two pros daytrade live, they are at it every day here: DiscordFuturesChannel.
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Finally, be sure to check out VampireTrades and his amazing penny stock trades.
Thankyou Family!
theBoss
Nothing above is investment advice nor should it be construed as investment advice. It is offerred for entertainment purposes only. Always consult your advisors before investing any money. Do not "follow" or "mirror" any trade ideas provided. Mr.NotAdvice is not a licensed or registered investment advisor. Do your own research.