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Monday Market Movement – The Gathering Storm

Things are deteriorating.

Last Monday, I warned:  "Friday, in addition to NFP, we have 3 Fed speakers – which makes me think the NFP report is going to be disappointing and they are lined up to spin it."  The Non-Farm Payroll Report was indeed a disappointment, with only 199,000 jobs added in December, just 1/2 of what had been predicted by leading Economorons.

It was, overall, the terrible week for the markets – especially the NASDAQ, which fell 1,000 points (6%) – 2/3 of the way to our predicted correction at 15,000.  It will, however, be a sad state of affairs if the 15,000 line on the NASDAQ does not provide at least some support for a bounce. This stage, a weak bounce would be 200 points and the strong mounts would be 400 points – those are the tests we will be looking for this week.  

A 10% correction on the Dow would take us all the way to 33,000 and 4,320 on the S&P 500 and 2,200 on the Russell and, oops, we just failed 2,200 on the Russell last week and that was the sign we've been watching for all winter to tell us when it was time to hedge more aggressively.  So the other major thing that we have to watch out for this week is whether or not the Russell can take back that 2,200 line.  If not, there's not much hope for a recovery from the other indexes and it becomes very likely that we are heading lower.  

We prepared for this on Friday by adding $327,000 of additional downside protection to our Short-Term Portfolio (STP), but in such a way that we are now able to cash in some of our early Russell hedges if the index gets back over that 10% line.  The Dollar is still strong, up around 96, which means it has a lot of room to fall and support the indexes should we get any Fed speak to indicate a softer stance.

That brings us to our Economic Calendar and, this week, we have a good amount of data starting with the Fed's Bostic (slightly hawkish) at noon today and then Esther George speaks tomorrow morning, but who cares as Powell is speaking at 10 AM?  That is his testimony to Congress so we better pay attention.  Small Business Optimism is another thing we need to pay close attention to in the midst of Omicron.  Wednesday we have CPI, Inflation Expectations and the Beige Book, but certainly we shouldn't discount the 10 year note auction (get it?).  Thursday we hear from Harker (slightly hawkish) and Brainard (very dovish) and we wrap up the week with Retail Sales, Import Prices, Industrial Production & Consumer Sentiment topped off with a statement from John Williams – who is generally dovish.  

Earnings Season kicks off on Friday when the big banks start to report but we will certainly be curious as to what Delta has to say about last quarter's travel situation.     

And yes, Covid is still a thing with over 60 MILLION confirmed cases in the US (20% of us) and a whopping 10M of those cases have hit us in the last month.  The seven day average number of infections is now three times higher than it was at the prior peak. I know this is just all boring numbers but holy crap people, can't you read a chart?      

Not you guys, of course, I am talking to the rest of America who I have had the pleasure of sharing Orlando with this weekend and the gist of what I am getting from talking to people in this area is that the Orlando real estate market is booming as more and more people are moving away from the north east because they are sick of being told to take precautions.   We took the kids to Midieval Times last night and, though there were numerous signs telling people they had to wear masks, no one in the 1200-person audience was wearing one – just the wait staff…  

As we have certainly learned in the past two years - the best way to handle a deadly pandemic is to ignore it!

Be careful out there…

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  1. Phil, I cashed out of most hedges on the last dip, I have about $500k in this portfolio and looking for some new hedges.

  2. Wonder when $919 billion margin debt will become a thing. I suspect much of that is 'invested' in Nasdaq. 

  3. Is 10 Million Enough To Retire?

  4. Powell’s tough message for lawmakers: Party’s over

  5. The last 7 years have been the warmest on record as planet approaches critical threshold

  6. China Wages Two-Front War With Omicron and Delta on Eve of Winter Olympics

  7. Good Morning!

  8. Good morning! 

    I won’t be around today, I am in Orlando with the family. I will try to check in once in a while.

    Hedges/Swamp – see Fridays STP review.   

    Not a very pretty open so far.  

  9. Phil / VIAC –  

    ViacomCBS (NASDAQ:VIAC) shares are up nearly 4% in early Monday trading after Deutsche Bank upgraded the stock and raised its price target, citing increased streaming revenue in the future.

    Analyst Bryan Kraft raised his price target to $43, up from $39, noting that ViacomCBS (VIAC) could be re-rated higher, but it also offers investors "greater success in streaming, and potential industry consolidation as megacap tech sets its sights on becoming bigger streaming players, while current media industry players also potentially look for additional scale opportunities."

    Kraft noted that ViacomCBS trades at the lowest enterprise value to sales multiples, at 1.2 times 2022 estimates, in his coverage area. It also gets little credit for its streaming revenue, compared to Netflix (NASDAQ:NFLX) and Roku (NASDAQ:ROKU). "If VIAC were to trade at 8x 2022E streaming revenue, it would trade at $61," Kraft noted.

    ViacomCBS (VIAC) shares are up almost 4% to $36.66 but have fallen nearly 14% over the past year.

    Kraft also pointed out that the company's investor event, to be held later this quarter, will reorganize the company into TV Media, Filmed Entertainment and direct-to-consumer, which should "provide a more granular view into each area of the business from revenue to EBITDA, in addition to more details around content investment and how reinvestment into DTC is suppressing consolidated FCF conversion in the short to medium term."

    He added that this should be a "positive catalyst for the stock given the new segmentation and disclosure, as well as updated (higher) guidance for SVOD subscribers and Pluto MAUs."

    ViacomCBS (VIAC) may also benefit from increased interest in Paramount+, with Kraft citing positive Google Trends data, which should be a positive for the streaming service.

    There is a considerable amount of skepticism in the marketplace towards ViacomCBS (VIAC), as many believe it does not have the same intellectual property as Walt Disney (NYSE:DIS) or WarnerMedia (NYSE:T), and the belief that "not everyone will win in streaming," but the company has created hits and is likely to do so in the future, as evidenced by the success of "Yellowstone" and its prequel, "1883," Kraft noted.

    "While not everyone will succeed in streaming, we think Viacom has an opportunity to transition its business model successfully given its content portfolio (including sports rights), brands, globally sourced content production model, and an approach to the market that includes on-demand entertainment, linear channel feeds, sports, and news in all three streaming formats – subscription, subscription + advertising, and free ad supported streaming."

  10. Phil – You appear to be enjoying that 'Temple of Doom' ride a bit too much.

    Be careful out there!

  11. Is Moore’s Law Going to Become Obsolete?

  12. Phil / NQ Shorts

    Are you holding the NQ shorts till 1500?

  13. Pretty ugly out there today.  

    VIAC/Batman – Nothing we haven't been saying for a year at this point.

    Doom/1020 – Orlando is no worse than Delray, well maybe a bit worse.   I did not go to the park, that's over my limit. I'm leaving my girls up here for a few days I'm heading home tonight.      

    NQ/Jij – I would've cash them out on today's drop but I'm not home so they are riding   

  14. As a Steelers fan, that was a crazy crazy Sunday

  15. ….Karma bites spanos in the azz and leaves the remaining charger fans to question their loyalties…. ;)

  16. Disney Metaverse – High priced real estate, long lines to old attractions ….. :)

  17. Clarida leaving two weeks early.