Newsletter - 04/28/2024
UPCOMING WEEK:
With First Republic Bank of Philly being seized by the FDIC, it would appear that the bank crisis is finally metastasizing. It is not. $FRBK already had been delisted and it was trading for pennies. Even though the reason why, their MTM portfolio of loans could no longer be "hidden", is going to pressure all regional banks eventually, this particular bank should not shake the system - too small.
But this is a preview of what's coming and when it starts, it will not be able to be stopped by anything other than QE.
Week in Review
From TRowePrice:
"The S&P 500 Index and most other major benchmarks managed to snap a string of three weekly losses as investors responded to the busiest week of the first-quarter earnings reporting season. As of the end of the week, analysts polled by FactSet were expecting overall earnings for the S&P 500 to have increased 3.7% in the first quarter relative to the year before, with “both the percentage of S&P 500 companies reporting positive earnings surprises and the magnitude of earnings surprises... above their 10-year averages.
The technology-heavy Nasdaq Composite Index performed best, helped in part by strength in Apple and a late rebound in chipmaker NVIDIA. Shares in Google parent Alphabet also surged late in the week following its announcement of better-than-expected first-quarter earnings along with the company’s first dividend payment. Conversely, Facebook parent Meta Platforms fell sharply—at one point erasing nearly USD 200 billion in market value—after CEO Mark Zuckerberg announced plans to continue heavy spending on artificial intelligence and other new technologies.
The week started off on a strong note, which seemed to be due to investors trying to capitalize on recent declines in the tech sector as well as short covering, or buying to limit potential losses on bets that stocks will decline. The buying continued on Tuesday, which may have been due in part to some downside surprises in economic data—interpreted as good news for markets because of the reduced pressure it implied on inflation and interest rates. S&P Global reported that its gauge of U.S. manufacturing activity fell back into contraction territory (below 50.0) in April, at 49.9, well below consensus estimates of around 52.0. S&P’s gauge of services sector activity, while still indicating expansion, also missed expectations, at 50.9 versus 52.0.
Thursday’s bad economic news appeared to be treated as bad news, however. The Commerce Department’s advance estimate showed the economy expanding at an annualized rate of 1.6% in the first quarter, well below consensus estimates of around 2.5% and the slowest pace of growth in nearly two years. A sharp slowdown in government spending and a widening trade deficit were partly to blame, but consumers also continued to rein in spending, particularly on goods. Separate data released Wednesday showed that businesses continued to increase capital spending in March, but at a slower pace (0.3%) than in February, where the gain was revised lower to 0.4%.
Inflation data released Thursday also seemed to concern investors and raise worries that the U.S. might even be in danger of “stagflation,” or rising prices alongside flagging growth. The Commerce Department reported that its core (less food and energy) personal consumption expenditures (PCE) index rose at an annualized rate of 3.7% in the first quarter, more than expected and well above both the fourth quarter’s 1.7% increase and the Federal Reserve’s 2% long-term inflation target.
Friday’s rebound in stocks appeared largely due to better news on the inflation front, with futures jumping after the Commerce Department’s release of monthly core PCE data. Core PCE inflation continued to decline on an annual basis in March, if ever so slightly, falling to 2.82% from 2.84% in February, continuing a downward trajectory that began in October 2022. Friday also brought news, however, that the University of Michigan’s revised gauge of consumer sentiment in April fell back from a nearly three-year high in March, reflecting, in part, higher inflation expectations.
The yield on the benchmark 10-year U.S. Treasury note decreased somewhat following the release of Friday’s PCE data but still ended the week near its highest level in almost six months. (Bond prices and yields move in opposite directions.) Our traders noted strong retail and institutional demand for new deals in the tax-free municipal bond market, with many oversubscribed. Meanwhile, the investment-grade corporate bond market had a relatively quiet week with limited issues that were also largely oversubscribed."
Sectors
SPX and NDX
The SPX retraced about 75% of it's down move from last week so right at the upper range for the downtrend to be intact. While the market was able to rally off of tech earnings, it remains to be seen once those are over if the market has truly found it's bullish legs again. I remain unconvinced.
I do not think anyone would argue that risks are at significantly high levels. Geopolitical risk, market risk, election risk, inflation risk.
There is no doubt in my mind that one of these will eventually cause the large downdraft that I believe is coming. My only questions are when and how bad.
I have zero confidence that any further bullishness will be anything
other than temporary. This reminds me of the summer of 2008 so much. While the market is focused on the day to day they willfully are ignoring the enormous amount of outlier risk that continues to build. It is only a matter of time.
For those of you new: I have been calling for no interest rate cuts and instead, interest rate hikes for at least since November of 2023, while the rest of the experts were saying 6 cuts, 4 cuts, 2 cuts, 1 cut.
for me to be convinced this market has bullish legs, it needs to close above last week's high on the weekly. Other than that, it is more of the same: chop chop.
NDX:
NDX has the same issue as the SPX - last week, while exciting, is merely a retrace after a strongly bearish week. Taking into recent market behavior, I see no reason why this should not continue this week as the "bid" in the market seems to have come back, at least for last week. It remains to be seen if price is able to take out last week's high on a weekly close. Until then, trend is still down to sideways and I will trade that accordingly.
Small caps are trading inside of last week's range so this past week was a nothing meaningful from a technical basis. I have very little confidence that small caps are going to finally start to participate to the topside as I think a lot of the moeny that would normally go into small caps when into BTC ETFs.
Fund Flows
Not much to say but this: do you see any positive money flows into any asset? I thought not.
As for the sectors, Technology saw negative funds flows for the 3rd straight week. Communication stocks remain strong from a sector perspective while Utilities remain strong for the 5th week in a row.
Bitcoin & Miners
The Halving turned out to have no immediate affect on BTC which is actually inline with past halvings. In the past the last two halving saw a price move in BTC but only after some time had passed. But that was in a totally different environment. I still believe BTC will see 100k this summer based on supply and demand only.
IREN is in a wedge. Which way it breaks first will be it's direction. All we can do is wait as the "new normal" for valuing miners is complete. Earnings this week and next for all the miners will provide a clue to their direction.
CIFR is the strongest out of the miners I still own. We are not far from recent highs so I continue to hold. It helps that I have made so muchmoney from it already.
BITF is the weakest out of the miners I own and if price does not reverse this week I will look to roll or exit for a loss. Remember, I own a basket of miners so all of any potential losses have already been more than "made up."
I will look to do something with BITO depending on which way BTC breaks. Until then, there is nothing I can do.
Doom Trades
$KRE
KRE moved up this week on strong earnings from regionals that mostly beat but at the same time, NONE OF THEM REPORTED ANY POTENTIAL LOSS IF THEIR LOAN PORTFOLIOS WERE ACTUALLY MARKED TO MARKET. MTM was what caused the Philly bank to fail and it is what will cause more regionals to fail. I believe we are seeing the last quarter of financials before we start to see bad earnings reports. Moreso, perception about banks will be shook by the failure of the Philly bank but that also could be temporary. It is just a matter of time.
$VNQ
This is what is known as a "Fat Pitch" trade. Unless someone, anyone can tell me ONE SINGLE GOOD DATA POINT related to REITs, I remain convinced this will be a 4x or more trade. Sometimes it is that easy but most of the time, no one will "see it."
$BAC:
DOOM trade entry trigger was nullified so I continue to wait. If I decide I can get more potential return out of $VNQ, I will modify my allocations.
$TQQQ:
This week will tell me if my $TQQQ short will be a money winner or loser. All that matters is the close this week. Failure to take out last week's high would be bearish.
$HYG:
Price closed back above the trade trigger level so it is back to waiting.
Current Open Positions
$CFLT:
I did not scale when I could have and price moved against me. If price does not recapture the break level to the downside this week, I will be out with a small loss. -21%.
$APOG:
Price broke, I entered, price reversed the very next day. But patience and my rules on stops continues to guide me well as price closed above Thursday's highs, printing a bullish reversal. Momentum is positive and growing as is institutional buying. Up 2%.
$DNUT:
Price is trending downward. Even with Thursday's green candle trend remains down. Either priuce breaks thursday's and Friday's highs, where I will close the position or price breaks those day's lows. Either way, it is not my decision. Up 14%.
$IRDM:
$IRDM broke and has been very strong. VIPs had a chance to sell for a 100% gain on Friday although I did not even scale. I believe price is going higher and MACDHisto and SmartMoney Index are supportive of this. I WILL look to scale at +200% if we get there. Up +86%.
Closed Positions
$PENN:
Obeyed the stop and sold for a 25% loss. Next.
Doom Update
DOOM 1: CRE IMPLODES
I see no need to update what I wrote last week - are you listening yet????
"I could keep posting about falling values, falling cash flow but that's boring. How about this gem to the left? This guy is probably a savant. For real. So when he says banks are also experiencing stress from residential multi-family . . . well that's even worse!
Look - IT DOES NOT MATTER! THERE IS NOTHING THAT WILL SAVE CRE EXCEPT A BAILOUT. PERIOD.
This is a fat pitch situation. What's going to save them? The regionals? Anyone? I am being dead serious. Other than what I mentioned above, what is going to save them?
Exactly.
I had better never hear a member say "Why didn't I see that?" I will immediately ban them. If you don't want to risk money that's fine but if you don't see how bad it is and it is GETTING then why are you in my Discord?"
DOOM 2: JAPAN GOES FULL KICHIGAI
Anyone who takes the JCB seriously is just as retarded as they are. Seriously - they have lost control of the Yen and the ONLY reason they are doing nothing about it is that their overlords at the Fed and Treasury have not given them permission to do so. When will this happen? I have no idea.
But to put the NEW LINE IN THE SAND of 160 Yen, historically it's not even that high. You just have to take the time to look at the longer term history. When the JCB finally does get the green light, it will have borad ramifications to the carry trade, you know the one that has been used to perfection to drive the VIX down and the SPX up. It will blow it up. And that's why the US Government is forcing the JCB to watch as it's currency is destroyed. Who cares about the Japanese citizens. Who cares about Japan trade. who cares indeed.
Where are We and Where are We Going?
I do not know how much more clear I can be. The market is in a precarious position right now and any bullish moves are imo no more than the last gasps of a bull market driven by excess liquidity/stimulus. The simplest way to look at this is that for years there has been constant liquidity/demand. This has fueled the market higher. Not economic growth, not company fundamentals. Stimulus.
If and when the market accepts that there will be no more stimulus forthcoming, it will drop very quickly and painfully. When will that be? I do not know but certainly, the pressures to the downside are building to the point where it is making a down move almost inevitable. I am not saying the market will drop 50% (it could if certain things happen, which I have already discussed repeatedly). What I AM saying is that when looking at the risk to reward profile, which side is "heavier?" Risk is.
It can be difficult to trade against the market - to take intellectual positions that are not inline with the current market speak. But isn't that the point? Everyone talks about wanting to be in those types of trades that turn out to be portfolio makers. But very few have the courage to actually do so. Make no mistake, it takes courage to rely upon data and not emoition., It takes courage to prepare for possible bad outcomes while others appear to be celebrating and ignoring the building risks.
But that's what I have done for 30 years. 90,000 hours. Ignored the noise and traded what I saw. It's a phrase that I hear used all the time, but followed rarely. Often it is not that you see things others do not, it is the fact that you choose not to ignore it.
Could Ibe wrong? Sure. I have been wrong before but I am not wrong this time because the data is overwhelmingly in support of my view: the market and economy are barely holding on and all it will take is a push over the edge before downward and negative momentum is started.
So, for the umpteenth time ask yourself this simple question: which side is more heavily weighted by data: that the economy is doing better or that it is doing worse? That the geopolitical situation(s) are largely benign or very risky? That you are paying more for everything or inflation is coming down?
DO NOT MAKE THE MISTAKE OF PICKING UP PENNIES IN FRONT OF A STEAMROLLER in the pursuit of capturing every last bullish move. Risk is high, the highest it's collectively been in my 31 years of experience. you can choose to ignore this and you will lose money, maybe a lot. Or you can choose to listen and get prepared. If you KNOW what's going on and you refuse to do anything to prepare, YOU DESERVE TO LOSE MONEY. Sorry but its true and I don't make enough money doing this newsletter and all the other content to care about your feelings. I care more about trying to teach you the right way since you have been so universally bad at doing so, through no fault of your own. It is what you have been taught and sold for your entire life. But now that you have met me you can longer say when it all comes crashing down that you didn't know ahead of time, that there were no warning signs. You had me. Period.
Where are we going short-term (next 1-3 months?) I do not know and don't particularly care as it is related to this topic. In fact, I have provided above the levels that need to be broken for price to tell me which way. Yes, it is that easy and that is part of the reason some will still not listen - they expect it to require inside information or rows of tech geeks. It does not.
Any up move IS NOT SUPPORTED BY EARNINGS AND OUTLOOK DATA if you take out stimulus/liquidity. What's worse is that there is only one way to fix this: by ending the stimulus/liquidity. That is what is happening as we speak. Do not be one of those people who say "If I only had seen it coming.." Because that would be a lie.
PODCAST:
The Podcast library is here.
VIDEOS:
The Video library is here.
Paid Memberships:
Look, there are a LOT of scammers out there on FinTwit. 99.99% of them care only about selling packages of crap. SOME OF THEM ARE CHARGING AS MUCH AS $5,000 PER MONTH! None of them include what helped make me a better trader: having a mentor. Having someone who will be your PERSONAL TEACHER, COACH AND ACCOUNTABILITY PARTNER. A Mentor that has over 90,000 hours of screen time. That by itself is invaluable.
People ask why I charge. First, I want only VIPs that are committed and "having skin in the game" guarantees this. Second, because my time is valuable.
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.