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Will We Hold It Wednesday – Russell 2,200 – As Usual

We are right back to where we were last week.

It's also the same place we were on December 21st, following our bounce lines at:

  • Dow  36,000 to 34,200 has bounce lines of 34,560 (weak) and 34,920 (strong) 
  • S&P 4,700 to 4,465 has bounce lines of 4,512 (weak) and 4,559 (strong) 
  • Nasdaq 16,500 to 15,675 has bounce lines of 15,840 (weak) and 16,005 (strong) 
  • Russell 2,400 to 2,080 has bounce lines of 2,144 (weak) and 2,208 (strong)

Actually, the Nasdaq has improved from red to black as it's at 15,862, so too close to give it a color at the weak bounce line and we'll be watching the Nasdaq closely today as well as, of course, the 2,200 line on the Russell, which remains our best market indicator.  Volume was back to low (74M on SPY) yesterday – so we're not putting a lot of faith in these levels after just one day.  Yesterday Powell boosted the markets telling us he can beat inflation without harming the markets – he's MAGICAL!  

Silly or not, that's what traders want to hear and a small number of them rushed in and bought up the indexes despite 1.3M Covid cases on Monday (30% more than the previous record) and despite the most inflation since the "Carter Disaster" of 1982 (a year after Reagan took office) and despeit the fact that our grocery stores now look like Russia in 1982:

PHOTO: SARAH SILBIGER/REUTERS

Economists surveyed by The Wall Street Journal estimate the Labor Department’s consumer-price index—which measures what consumers pay for goods and services—rose 7.1% in December from the same month a year earlier, up from 6.8% in November. That would mark the fastest pace since 1982 and the third straight month in which inflation exceeded 6%.  Powell said he was optimistic supply-chain issues would ease this year and help bring inflation down.

And, by the way, this record-high inflation is WITH Omicron knocking down prices for travel, recreation and other in-person services – our inflation would be A LOT higher if airfares and live-event tickets hadn't collapsed last month.  Oil prices were also down in December (though back now) – helping keep the monthly total below a Brazil-like 10%.  

Despite disruptions from Omicron, there are some indications of improvement in supply-chain woes. A December survey of manufacturers by the Institute for Supply Management showed a decline in prices and delivery times, signaling that materials shortages might be easing – that's the data Powell is hanging his hat on – but it's just the one data point so far.

atlanta fed gdpnow growth estimate for 4q rises modestly to 6 8 from 6 7 previouslyWe have CPI and Business Expectations this morning and the ever-dovish Neel Kashkari speaks at 1pm, along with a 10-year note auction that will be interesting and then, at 2pm, we'll get a look at the Fed's Beige Book and hopefully get some clues about how Q1 is looking but, as you can see, Q4 seems to have seen 6.7% GDP growth – albeit off a terrible Q4 in 2020.

Of course, if inflation is 7.1% and your GDP growth is 6.7% then your economy actually SHRANK 0.4% – you just paid more money for the same stuff you bought last year — sucker!  

Despite the markets bouncing back, we are still very concerned about China and their property crisis going into the Chinese New Year (Feb 1st) and we doubt the Chinese Government will allow the economy to collapse ahead of the holiday week but after is anyone's guess so we're mostly watching and waiting at the moment – for a few more weeks.  $197Bn in Chinese bonds were maturing in Janaury and companies like Evergrande and Guangzhou have only prevented default by pushing back their dates – nothing is being solved.  

relates to China Property Firms Face Raft of Key Payments This WeekA selloff in Chinese high-yield dollar bonds, dominated by property notes, is set to continue for an eighth day. The notes fell 0.5 cents to 2 cents on the Dollar Wednesday morning, according to credit traders.  Prohibitively high borrowing costs in the offshore market have effectively frozen many builders out of the offshore bond market, making it difficult to roll over that debt.  This is the kind of disaster that leads to a Global Financial Crisis – usually…  

But these are not usual times so we hang onto our longs and hedge in case of disaster – which is always just around the corner but, so far, has not come.

As to Covid – I have nothing to say at this point.  It gets worse every day and people seem to double down on ignoring it:

The Civil War was the "bloodiest battle" in American history and 504 people per day died fighting that one.  Covid has already killed more Americans in two years than a war between the states with guns did in 4 years – though I bet, with the guns we have now, we can beat that record in the next civil war.  The way things are going – we'll probably find out soon!  

Pro-Trump group plans second rally for Dec. 12 | WBFF

 


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  1. Good morning. Here is the link to today's webinar

    https://attendee.gotowebinar.com/register/7684514674667947275


  2. Oil prices climb to two-month high


  3. Pressed on his election lies, former President Trump cuts NPR interview short


  4. Covid-19 hospitalizations reach record high, HHS data shows


  5. Good Morning!


  6. Good morning!

    Dow up 200 at the open.  /NG is really flying:

      

       

    All boosted by the weaker Dollar, of course:

    That's down 1% since yesterday's open so the Dow better be up 400+ points!

    In other words, all meaningless nonsense at the moment.  

    At least I hope so with 6 short /CLs down $2,000 each at the moment ($82.50)!


  7. /SI and /GC are saving me.

     




  8. JEF  off today after earnings, that looked decent to me.  Dont we have them in a portfolio? 


  9. Comment content omitted because it is too long.


  10. Unrealistic:

    Jan. 12, 2022 10:04 AM ET

    • January Atlanta Fed Business Inflation Expectations: unchanged at +3.4%.
    • Current economic environment: Sales levels and profit margins "compared to normal" remain relatively unchanged. Year-over-year unit cost growth increased slightly to 3.7 percent, on average.

    SP500 +0.69%Jan. 12, 2022 9:35 AM ET10 Comments

    • The stock market has 1982 on the mind, which means E.T. and Raiders in theaters, Reagan in the White House, the 49ers as Super Bowl champs and a CPI with a seven handle.
    • But the major averages are higher in the absence of a big upside surprise.
    • The Nasdaq (COMP.IND) +1% leads the S&P 500 (SP500) +0.7% and Dow (DJI) +0.5% after outperforming yesterday.
    • The 10-year Treasury yield is down 3 basis points at 1.71%.
    • "The stock market is expecting inflation at a high rate for the next 3-6 months," George Ball, chairman of Sanders Morris Harris says. "It's what comes after that period that is likely to sway stock prices. Subsiding inflation in the second half of this year is the presumption currently, but if that doesn't happen, it will be a shock to the stock market."
    • Energy prices fell in the December CPI report, there was some concern about at the core level with rents and apparel prices.
    • "The surge in rents is due to the continuing rapid increase in home prices, as well as faster wage growth and the very low rental property vacancy rate," Pantheon Macro's Ian Shepherdson says. "December’s increase was marginally smaller than in the previous three months, as the first chart shows, but the downtick likely is not significant. We expect the rapid monthly gains to continue until the middle of this year, at least. A sustained slowing requires a big increase housing market inventory, which we hope to see in the spring."
    • The Fed's Beige Book comes out this afternoon for a more local look at economic conditions.
    • Jan. 12, 2022 8:32 AM ET186 Comments

      • Retail inflation hit a four-decade high, rising last month and matching Wall Street expectations.
      • The December consumer price index rose +7% year over year, up +0.5% for the month.
      • Economists predicted an annual rise of 7% and a monthly rise of 0.4%.
      • The core CPI, which excludes food an energy, came in at +5.5%, highest since 1991, and +0.6% for the month vs. expectations for 5.4% and 0.5%.
      • Overall, the numbers were a little higher than forecasts, but not much of a surprise to markets.
      • But a seven-handle on CPI further supports the Federal Reserve's hawkish tilt. Fed funds futures are pricing in an almost-guaranteed rate hike in March.
      • Today's report "doesn't change anything for the Federal Reserve's policy plans and it has already told the markets that it expects a tight labor market, rising wages and low unemployment to continue," George Ball, chairman of Sanders Morris Harris, says.
      • "Rising salaries and a shrinking labor force is a frightening combination because it leads to higher prices, lower profit margins and the potential for a recession," he adds.
      • "Getting to the composition: Services +0.3% lowest in 4mths, good sign for cooling OER (housing) +0.4% is same as last 4mths, still high (expect to settle +0.3% late 2022)," Janney fixed income strategist Guy LeBas tweets. "Used cars +3.5% still driving levels higher and we know that comes out in summer 2022."
      • "My initial conclusion is that, while the headline is high, the composition is a bit better than last month and should be enough to give hope that inflation is likely to dip."
      • "The energy index declined 0.4 percent in December; this followed a 3.5-percent increase in November and was its first decrease since April 2021," the BLS says. "The gasoline index fell 0.5 percent in December after rising 6.1 percent in both November and October."
      • "The food index increased 0.5 percent in December following larger increases in each of the three previous months."
      • Rent and owners' equivalent rent both rose 0.4%.
      • Used car prices rose 3.5%, persistently high after gains of 2.5% in the last two month.
      • "Jumping out at me is the 1.72% rise in Apparel prices m/m," investment manager Michael Ashton tweets. "Apparel is only 2.7% of the basket but has been in deflation for years, punctuated by occasional attempts at price increases. Right now Apparel is +5.8% y/y. Some of that is likely shipping b/c apparel isn't made here."
      • See Fed chief Jay Powell's comments on inflation in his Senate appearance.

    BABA +3.30%Jan. 12, 2022 9:05 AM ET9 Comments

    • Chinese Internet and tech stocks rose Wednesday as companies such as Alibaba (NYSE:BABA) and JD.com (NASDAQ:JD) gained ground following a report that DiDi Global is getting closer to listing its shares in Hong Kong.
    • Before the U.S. stock markets opened, the South China Morning Post reported that DiDi (NYSE:DIDI)--known as the Uber (NYSE:UBER) of China--could move its shares listing from New York to Hong Kong as early as the second quarter of this year. DiDi (DIDIsaid last month that it would move its listing to Hong Kong, and that it will do so via a "listing by introduction" method.
    • As part of its U.S. delisting, DiDi (DIDI) will reportedly offer its ADS shareholders a 1-for-1 exchange for their shares in Hong Kong.
    • DiDi (DIDI) shares rose more than 5% in pre-market trading following the Hong Kong report. As is often the case, several well-known Chinese tech stocks climbed alongside DiDi (DIDI).
    • Alibaba (BABArose 3.4%, Weibo (NASDAQ:WB) was up by 2.6%, Baidu (NASDAQ:BIDU) shares climbed 3%, Tencent Holdings (OTCPK:TCEHY) and Bilibili (NASDAQ:BILI) were both up by more than 4%, and the KraneShares CSI China Internet ETF (NYSEARCA:KWEB) moved upward by more than 3%.
    • JD.com (JD) flexed its muscles as its shares edged up by 2%. JD's (JD) gains came on top of its shares climbing more than 10% on Tuesday after Atlantic Equities started coverage of the Chinese e-commerce company with an overweight rating.


  11. ADM +0.07%Jan. 12, 2022 9:41 AM ET1 Comment

    • JPMorgan assumes coverage on Archer-Daniels-Midland Company (ADM +0.2%) with a Neutral rating on concerns that EPS is close to a peak.
    • On the positive side, analyst Thomas Palmer and team think ADM earnings are likely to come in ahead of consensus estimates for the next few quarters and see the potential for EPS growth over time from growth in the Nutrition business, volume growth in Ag Services and share repurchases.
    • However, they warn on cyclical headwinds for both Refined Products in 2022 and Crushing in 2023, which could cut into profits.
    • "And we expect recent strength in ethanol margins to be short-lived. We see the shares’ current valuation as reasonable and do not see quite enough upside to estimates to warrant a more constructive rating on the shares."
    • The firm derives a price target on ADM of $74 on a sum-of-the-parts analysis. The average analyst price target on ADM is $70.14.

    ISRG -0.84%Jan. 12, 2022 9:23 AM ET4 Comments

    • Intuitive (NASDAQ:ISRG) reports 19% Y/Y growth in its global da Vinci procedures for 4Q21; the growth is 13% when compared with pre-pandemic level of 4Q19.
    • 4Q21 preliminary revenue is estimated to $1.55B (+17% Y/Y), taking the full-year revenue to $5.71B (+31% Y/Y).
    • The company reports it shipped 385 da Vinci Surgical Systems during the quarter an increase of 18% compared with 326 a year ago. For FY21, the number stood at 1,347, up 44% Y/Y.
    • The compound annual growth rate between the full year of 2019 and the full year of 2021 was approximately 12%.
    • FY 2022 Guidance: The company expects worldwide da Vinci procedures to increase approximately 11% to 15% in 2022 as compared to 2021.
    • Final results for the quarter is scheduled to be released on Jan. 20, 2022.
    • Also Read: COVID uptick to hurt MedTech firms and healthcare providers in early 2022 – Goldman Sachs

    MTN +2.61%Jan. 12, 2022 9:02 AM ET

    • Vail Resorts (NYSE:MTN) is on watch after Deutsche Bank tags the leisure stock as a catalyst call buy idea with shares down recently.
    • "In our view, near-term sentiment on MTN has tilted in a direction that we view to be overly negative in light of the more favorable macro backdrop that we think is driving record visitation to its resorts.”
    • The firm also reiterated its long-term hold rating on Vail.
    • Shares of MTN are up 0.68% premarket to $302.00 vs. the 52-week trading range of $261.41 to $376.24.
    • Early ski season concerns about a lack of snow in key regions have faded after monster storms in Tahoe and Colorado.

    CROX +6.11%Jan. 12, 2022 8:19 AM ET1 Comment

    • Piper Sandler turns even more constructive on Crocs (NASDAQ:CROX) after noting the sales strength displayed during the holiday season.
    • Analyst Erinn Murphy calls Crocs (CROX) one of the most impressive consumer growth stories for several years to come. The stock is locked in as a top idea in the sector.
    • Murphy is also positive on the recent Heydude acquisition, noting that a Gen-Z survey showed higher awareness of the brand in the Midwest than in the Northeast.
    • "While there has been no shortage of investor push-back to the Hey Dude deal (from the timing & size of the deal to concerns around 'fad' potential etc.), we believe therein lies the opportunity," she notes.
    • Piper Sandler lifts its price target on CROX to $246 from $215. The average analyst price target is $191.57.
    • Shares of CROX are up 1.99% premarket to $128.78.
    • Dig into details on Crocs's guidance update at the ICR Conference.

    RCL -0.59%Jan. 12, 2022 7:48 AM ET1 Comment

    • There is a new indication from Bank of America that the omicron COVID variant impacted the recovery in the cruise line industry during December.
    • Core cruise spending was down -39.8% in December compared to the 2019 level after being down 29.2% in November, per Bank of America credit and debit card data. Meanwhile, total monthly card spending on cruise including refunds declined to -46.6% vs 2019 in December vs. -33.3% in November.
    • "In December, omicron impacted spend, which is not surprising given RCL reported a decline in bookings and increased cancellations for near-term sailings," notes BofA analyst Andrew Didora.
    • Looking ahead, Didora and team say that BofA's cruise pricing survey shows ticket prices in 2023 are steady with some pricing softness in 2022 likely given the continued variant headlines.
    • Premarket action: Royal Caribbean (NYSE:RCL) -0.28%, Carnival (NYSE:CCL) -0.44%, Norwegian Cruise Line Holdings (NYSE:NCLH) -0.10%, Lindblad Expeditions Holdings (NASDAQ:LIND) inactive.
    • Seeking Alpha author Double J Investments posted a bearish article on RCL earlier this month.


  12. Stopping out of /GC and /SI because my losses on /CL offset the gains so can't risk both.


  13. Adding 2 more short oil at $82.50 as the inventory report is a disaster:

    CL1:COM +1.26%Jan. 12, 2022 10:30 AM ET

    There's no way they can spin that positive.


  14. /NQ back at 16,000 is another tempting short, with tight stops above but I'm too wounded from /CL to play anything else at the moment.


  15. Phil

    Is it time for LABU trade ?

     Thanks


  16. Phil,

    In this environment, what are your thoughts on COST, BJ and even CRRFY, especially given the high debt of the last two?

    TIA


  17. LABU/QC – Went way out of favor, didn't it?  Clearly one we need to start watching again.  $20 was a good bottom last time they crashed.  

    COST/8800 – I think COST's subscription model is so successful they are essentially economy-proof but the same model also means they don't benefit from a strong economy.  They have 828 stores and 113M cardmembers.  BJ's has 216 clubs and I don't see member data for them.  COST revenue is $220Bn and profit is $6Bn but $527/share is $231Bn in market cap and I'm not paying 40x for a company that already has 1/3 of the US as a member (it's actually 1/2 the households too).  BJ is only $9.35Bn so you think room for growth or just far less successful with $17Bn in sales and $450M in profit so 50x earnings for them is ridiculous.  I don't know enough about CRRFY to have an opinion – it simply indicates that neither COST or BJ are going to have an easy time expanding overseas.  

    There are so many great value stocks to buy – I can't imagine why you would even consider piling into overpriced retailers after you've already missed a double or more recently.  

    Webinar time!


  18. I think they will spin it as the US Crude Stocks/Inventory is at the lowest level since 2018.


  19. Good webinar, went over a lot of potential plays from our Dec 30th collection.

    Oil/Randers – Good call, could have saved me a few bucks!  Still, they are trading oil for product and traders can see that.  

    Gold and Silver still going strong. 

     

    Dollar still dying:

    No floor at 95 – that's surprising.  Powell sounded more dovish than I thought. 

    Dumping the Dollar is a great way to mask stock selling.  

    How's this for disparity of perspective:

    What is Yelp? - Quora



  20. Here is the link to the replay of the week's webinar.

    https://youtu.be/WtfdkRy9jpk


  21. Splits: Heads up! TQQQ will forward split 2:1 and SQQQ will reverse-split 1:5 tomorrow (prior to open)


  22. From this morning's PSW Report:

    Moderna, MRNA, has fallen more than 50% below it's peak and yes, it's peak was silly, but $222/share is $90Bn in market cap for a company that will make $11.5Bn in profits this year.  It's being sold off because people think it's a one-trick pony but the Covid vaccine was more of a proof of concept for their process and they now have $22Bn (2 year's profits) to play with in the R&D department:

    The thing about the mishandling of the pandemic is that we gave the virus a chance to spead so widely that it is now ENDEMIC, like the flu – and we're never going to be completely rid of it.  That means MRNA will make money for many years to come on covid vaccines so, even if they are a one-trick pony, that trick may last a lifetime.  Still, they have a robust pipeline – as noted in their recent report:

    We have been waiting for MRNA to bottom out so we could get back in (we sold our old position near the top) and we discussed making a move in yesterday's Live Trading Webinar (replay available here).  We sold 5 of the 2024 $200 puts for $25 and they are now $50 so we're down 100% on those but our net entry is $175 and MRNA is at $222 so it's only a loss on paper – we intend to stick it out.  As a full trade for our Long-Term Portfolio (LTP), I would like to add:  

    • Sell 10 MRNA 2024 $180 puts for $40 ($40,000) 
    • Buy 20 MRNA 2024 $200 calls for $78 ($156,000) 
    • Sell 20 MRNA 2024 $250 calls for $59 ($118,000) 

    That's a net credit of $2,000 on the $100,000 spread.  There's a heavy obligation there to buy 1,000 shares of MRNA at $180, or net $178 but that's a 20% discount to the current price.  If MRNA fails to hold $200 or our $200 puts (the ones we already sold) go over $60, we will stop them out with a $35,000 loss and stop out of 5 of the short $180s for about $25,000 and then we'd be in for net $58,000 on the $100,000 spread and we'd reposition from there.  Hopefully, it doesn't give us that kind of trouble and we make $102,000 (5,100%) against our cash investment.  

    Be aware this is a large position for our $2.4M Portfolio which is VERY well-hedged.  Make sure you are comfortable with the amount you could be assigned and proportion your trade accordingly!