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Thursday Failure – Rally Fails at the Strong Bounce Line (/ES 4,320)

Well, that was a nice try.  

Yodi wanted pictures so here's the S&P's bounce lines.  We haven't actually hit the 20% correction mark at 4,000 but, as long as we're stuck in the range betwwen the weak and strong bounce lines – we're most likely consolidating for a move lower  The bulls hope we're going to form the 4th leg of a "W" pattern here and recover back to 4,550 but we're already in a broken "W" pattern off the Strong Bounce Line and conditions haven't changed (worse, actually) so why should this time be different?  

Also note, as we predicted in our Live Trading Webinar last month, we're about to hit that "Death Cross" on the S&P 500 and that is BAD.  Even though we could see it from literally a mile (and a month) away, it will still come as a surprise to traders and analysts, who use TA completely wrong on a mass scale.  As I said at the time, if you understand HOW a chart is made, then you can predict what it will look like in the future.  If you are GUESSING where the market will go based on the chart you see - you're doing it wrong.

Very simply, the 50-day moving average changes slower than the 200-day moving average and "slower" isn't just some vague notion – it does, in FACT, change at a pace that is 25% slower than the 50-day moving average so every day the market closes below the 200-day moving average, it drags the 50-day moving average 4x lower than it does the 200-day.  Therefore, we KNOW how many days it will take before we get our crosses long, long in advance.

What does the Future hold?  Well we have the Fed Meeting next week and inflation is out of control so it's not at all likely they don't hike at all and the market expects 0.25% and 0.5% would be a big negative – so there's no likely positive there.  We also have PPI, Retail Sales, Housing Starts, Industrial Production and the NY and Philly Fed – hard to see any of those things popping us over the 200 dma so, if we assume we have another 7 trading days below the 200 dma – that is likely to pull the 50 dma below 4,450 – where we'll get our cross into Q1 Earnings – which are not going to be very positive either. 

Then there's the war (don't mention the war!) and Putin blew up a maternity hospital yesterday so, needless to say, peace talks are not going well.  Diplomats from Ukraine and Russia failed to reach an agreement on Thursday to reach a cease-fire or even to ease the worsening humanitarian crisis in Ukraine, dashing any glimmer of hope that Russia might soon pull back from a two-week-old conflict that has already killed thousands and displaced millions.  

Will millions of people are trying to flee the country of 40M, the refugee situation itself is already becoming a disaster because every country has a few Trumpy types who hate immigrants, no matter how dire their situation is and Poland, who have already taken in 1.3M Ukranians, says that, without UN help, this will become a "refugee disaster".  Poland has 38M people in it's country.  They US, by contrast, accepted 15,000 refugees all of last year – down from 45,000 before Trump and his wall – and they think that is a National Crisis…

Meanwhile, this is what it looks like for a mother and her children who were too slow crossing open ground to try to evacuate.  I'm sorry it's disturbing but it's important to remember all these policies we talk about have very real consequences for very real people and these are WAR CRIMES that are being committed by Russia – supporting their actions is… deplorable!  

Ukrainian soldiers trying to save a man — the only one of four at that moment who still had a pulse — moments after being hit by a mortar while trying to flee Irpin, near Kyiv, on Sunday.

Hey, at least it's not a picture of the Maternity Ward Putin blew up.  Are you not a terrorist if you throw the bomb from miles away?  It is very sad to see how spineless the UN and NATO have become.  We are still only giving the slightest aid to Ukraine – no direct military support of any kind.  Clearly we have not learned a single thing since World War I – people in the 21st Century shouldn't have to live in fear of being invaded or bombed.  We can stop this – we're just choosing not to.

Meanwhile, we watch and wait for the market to resolve itself but that looming Death Cross means it's not likely we'll be jumping off the sidelines in the next two weeks.  We went over our hedges yesterday and they seem adequate but I do keep thinking I'd rather be in CASH!!!


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  1. Thanks Phil a picture is better than a thousand words. Regret more sadly the pictures below the chart. They should put a Bin Laden job on him.

  2. Good Morning.

  3. putin is paranoid and living in a bunker. Let's hope for an 'inside' job….

  4. im surprised that someone has not yet put up an anonomous world wide web site that collects donations towards a contract on putin. im sure with bitcoin and blockchain technolgy the person that does the job could be certain of payment in the order of billions of dollars.

    Putin would have nobody to blame but himself. 

  5. Pretty Timeless Bob Dylan Masters of War from 58 years ago

  6. 13 years ago, S&P 500 bottomed out, those were not fun times either

  7. Good morning!

    Pictures/Yodi – It's believed that photography did a lot to end warfare – bringing the horror of war to people's doorsteps.  Unfortunately, these days, you need wartime TicToks.  

    Putin/1020 – You need a long-range weapon to get him from across those tables.

    Contracts/Tommy – Once you open the Pandora's Box of political assassinations – it's very hard to close it again.  It's ridiculously destabilizing and makes it difficult for Governments to function.  Putin is the last guy you want to play Assassination Roulette with, too.

    13 Years/Randers – Wow, seems a lot less. 

    SP500 -1.10%Mar. 10, 2022 9:32 AM ET1 Comment

    The stock market is lower Thursday, but selling is limited some as Wall Street dodged an inflation shock.

    A third round of ceasefire talks between Russia and Ukraine ended without progress, although there were indications the two sides would keep talking. That weighed on equities after yesterday's rally, while oil moved off of yesterday's lows.

    The Nasdaq (COMP.IND) -1.3%, S&P (SP500) -1% and Dow (DJI) -1% are down.

    Futures cut some losses after the February CPI came in at a high 7.9%, but in line with expectations. Gas prices jumped 6.6% for the month, while food prices rose 1%.

    "It was hoped a few weeks ago that these readings would mark the high of this inflation episode," Mohamed El-Erian tweeted. "No longer. With so many price pressures in the pipeline, even this 40-year high print will go higher."

    Rates are higher, but got more of a boost from the ECB move to wrap up asset purchases faster than from the inflation data.

    The 10-year is up 4 basis points to 1.99% and the 2-year is up 4 basis points to 1.72%.

    WTI crude is back above $113 per barrel after falling 12% yesterday.

    "Oil prices rebounded a little on Thursday, after hopes of an increased supply from OPEC declined a little," Mihir Kapadia, the CEO of Sun Global Investments, said. "There is a lack of clarity on the matter – while US and its allies have been pressing for a production rise, markets are awaiting OPEC’s plans."

    "While, Governments are releasing reserves to lower prices, this interim measure will not ease prices unless major oil producers signal a production rise. Since the 24th of February, oil prices have risen 30% and currently trading in the $114s."

    See the stocks making the biggest moves this morning.

    NFLX +0.49%Mar. 10, 2022 9:40 AM ET

    Netflix (NFLX -0.9%) is implementing a new price hike in the United Kingdom and Ireland.

    That comes just about 15 months after its last increase in the region.

    In the UK, prices on its most common standard plan are going up by a pound per month, to £10.99. The company had left its basic plan unchanged last time, but this time it's also going up by a pound, to £6.99/month.

    As for its premium plan (four devices simultaneous streaming and Ultra HD support), that's going up by £2 to £15.99/month.

    The approach is similar in Ireland, where the basic plan rises by €1 to €8.99/month; the standard plan rises by €2 to €14.99/month; and the premium plan rises by €3 to €20.99/month.

    The move also follows its recent price increases in the U.S./Canada home market, and the company points to the heavy investments required to bring a big catalog to users.

    In its last earnings call, Netflix's Greg Peters said there's no price target or competition concerns for particular countries: "We're listening to our members, and iteratively doing this walk where … engagement, and churn, and acquisition … are our signal that we're doing a good job … and that it's a right time to ask a little more to keep that going."

    MCD -1.73%Mar. 10, 2022 9:25 AM ET1 Comment

    Northcoast Research downgraded McDonald's Corporation (NYSE:MCD) to a Neutral from Buy.

    The firm was the first on Wall Street to take a negative rating action on MCD due to earnings risk from the situation in Russia and Ukraine.

    "McDonald’s has been active in Russia and Ukraine for decades. Closing operations temporarily will create headwinds to earnings that could continue for years. Case in point, Russian and Ukrainian stores contributed $300M to operating profits in 2021. Shuttering stores will cost McDonald’s $0.08 per quarter in EPS from the closures alone

    McDonald's (MCD) has only temporarily closed its 850 restaurants in Russia and 100 locations in Ukraine. It is unclear when the company will make a final decision with the war timeline a major unknown.

    Shares of McDonald's (MCD) fell 1.21% in premarket trading on Thursday and are down more than 17% on a year-to-date basis.

    CRWD +12.97%Mar. 10, 2022 9:09 AM ET1 Comment

    CrowdStrike Holdings (NASDAQ:CRWD) surged as much as 12% in pre-market trading, Thursday, as Wall Street threw its weight behind the cybersecurity technology company following its strong quarterly results.

    Late Wednesday, CrowdStrike (CRWD) reported a fourth-quarter profit of 30 cents a share, excluding one-time items, on revenue of $431 million, while analysts had forecast the company to earn 20 cents a share on sales of $411 million. The company also reported annual recurring revenue [ARR] of $1.73 billion, which was up by 65% from a year ago, and topped analysts' expectations for $1.68 billion. ARR is seen as a key measure of CrowdStrike's (CRWD) business health as it helps measure the company's subscriber growth.

    BTIG analyst Gray Powell used CrowdStrike's (CRWD) report to raise his rating on the company's stock to buy from neutral with a price target of $257 a share. Powell said CrowdStirke's (CRWD) growth in "tangential products" outside of the company's main endpoint security offerings as one of the main drivers of its recent performance.

    "Tangential products" include technologies such as virtual machines and identity management software. Powell said these items are growing at an ARR of more than 100% annually, and show that CrowdStrike (CRWD) "is clearly building a second or even third leg" to it growth story.

    For its full fiscal year, CrowdStrike (CRWD) said it expects to earn between $1.03 and $1.13 a share, on revenue in a range of $2.13 billion and $2.16 billion.

    Along with Powell, analysts at RBC Capital Markets raised their price target on CrowdStrike (CRWD) to $275 a share from $250 and maintained their outperform rating on the company's stock due to its strong results and forecast.

    Security companies such as CrowdStrike (CRWD) have been seen as benefiting from the war between Russia and Ukraine as businesses and governmental departments are expected to beef up their network security systems in anticipation of a rise in Russian-based cybersecurity attacks.

  8. Great morning write up, Phil.  Very glad that picture is making the rounds.  Needs to be seen.  Also crazy just how little we all care in comparison to the Middle East. Must be thousands of pics like that from the last 15 years in Afghanistan but the west can only relate to white people fleeing with pets. I wish we were more balanced with our outrage, myself included. 

    i also have a question for you relating to market expectations – there was this point in Covid, when everyone and their mother expected the market to continue lower. The macro environment hadn't been fixed,  but shock seemed to subside and upside frenzy ensued. At what point does this happen with inflation and war. I know people joke about "it's priced in" but where is the death cross intersection of expectation vs reality? 
    thank you!

  9. BABA is back to the price it started trading at back in 2014. This is insane. 

  10. Any news on GILD?  Seems like a bigger drop than just market related…  I feel like everyone knows something I don't

  11. Monkman – I don't know how much outrage a person can take, that is until a crazed man with lots 'o nukes starts acting up…


    It's a whole new ballgame. :(

  12. 1020/crazies with nukes – tell me about it; I was in Korea in spring 2017. Two crazies with nukes, one with a lot more.

  13. Jeff…GILD, spent 22B on what may be a disappointment. Was hoping to ask Pharm but he's MIA. 

     Phil, LMT was going to buy AJRD, deal fell through. They do spaceships. Thoughts?


  14. Where/Monk – Keep in mind that, over 2 years, the Government & Fed put about $9Tn into our $20Tn economy and much of that ended up going into the market.  Since we didn't all go out and buy 2 cars and 2 houses and get 3 Netflix subscriptions – it had to go somewhere.  There were, in fact, less workers and there was less shopping and less services but the same amount of money was thrown at it so prices, including the price of stocks – went up.   

    So now the real trick is matching inflated expectations and that's just not going to happen without more stimulus and now we have the Fed going the other way, trying to withdraw what they've already put in.  That's because pumping money into an economy is a very poor way to stimulate it (it's like saying if a patient needs 2 pints of blood, give him 10 and he should be able to run a marathon – you're just wasting 8 pints) but GDP is the measure of MONEY moving through the economy so having this much money in the economy when the velocity of money picks up without actual demand picking up can be dangerously inflationary.   

    That's where we are now – very different from where we were pre-Covid when the Fed had a $3.5Tn Balance Sheet and the US was "only" $22Tn in debt.  Now $9Tn and $32Tn, respectively.  So that's $19Tn in two years to boost a $20Tn economy – about 1/2 our GDP was from Debt, Stimulus and Money Printing.   

    And now it's time to pay the bill.

    BABA/Rn – Nice little start-up.

    Year End 31st Mar 2016 2017 2018 2019 2020 2021 TTM 2022E 2023E CAGR / Avg
    Total Revenue

    101,143 158,273 250,266 376,844 509,711 717,289 836,405 855,099 977,987 48.0%
    Operating Profit

    27,936 45,666 67,297 45,870 79,412 44,364 45,258     9.69%
    Net Profit

    71,460 43,675 63,985 87,600 149,263 150,308 65,458 143,074 154,608 16.0%
    EPS Reported

    27.9 17.0 24.5 33.4 55.9 54.7 23.9     14.4%
    EPS Normalised

    28.8 18.4 32.9 39.2 67.8 84.0 36.9 52.5 56.4 23.9%
    EPS Growth

    +191 -36.2 +78.9 +19.4 +72.9 +23.8 -43.0 -37.5 +7.38  
    PE Ratio

              7.59 17.3 12.1 11.3  

                  1.64 0.649

    Those are Yen so divide by 7 so that's $20Bn in earnings and $540Bn for the company so 27x is not screamingly cheap but a good price for the growth they typically get.  

    BABA acquired Sun Art in October and the acquisition will give them a "disappointing" Q1 so we'll see how that goes before pressing our bets.  Another problem BABA has is their main "social influencer" in China was shut down over "tax evasion" and that's cast a pall on everything they do at the moment – as no one likes to make waves in China.

    On the bright side, Charlie Munger has been buying the crap out of them around $100 – he thinks this is all overdone.  There's also a concern that China's new privacy laws will take away Baba's advantage – which is like FB and AMZN combined as they use every bit of data from their consumers to sell them more stuff.  

    Crazed men with nukes/1020 – I thought we just lived through that?

    It's not rocket science: After scrapping INF, how might we prevent Arms  Race 2.0? - The German Times

    AJRD/Kustomz – The FTC was blocking the deal so LMT bailed.  Yes they have a space-ship but mostly it's Patriot missiles the fuel their bottom line.  A rocket is just a missile you aim up anyway.  These guys do the propulsion systems.  LMT offered $51 and here's a great example of why things don't trade at the buy-out price (we were looking at ATVI yesterday) – it's all a question of how likely people think a deal with go through and then there's the breakup fee (if any – not here) and you have to consider how badly the company has been hurt after wasting a year on this nonsense with no result.

    $38 is down to $3Bn and they make about $165M on $2.3Bn in sales so kind of a fair price down here. You can sell AJRD Dec $35 puts for $3.50 to net in for $31.50 and that's a very reasonable return for 10 months "work".  

  15. WDC   looks like someone sold 750+ Jan24 $37.50 puts for $6.60   net if put to you $30.90   you have to go back 10 years to find that price on a chart


    Paramount CEO Bob Bakish Maybe Just Hinted That Paramount Is for Sale

  17. WDC/Stock – Good, solid company.  Maybe supply chain issues but long-term is excellent.

    PARA/Stock – That's what I've been saying.  Under $40 they are a buyout target.

  18. Germany called it with their Carnival float in March, 2019:

  19. I like these German parades!

    German Carnival Floats Depict Decapitated Trump, Hitler Comparisons | Addis  Ethiopia Weblog

    New poll shows Germans now trust US as much as they do Russia — which is  very little

    US PRESIDENT DONALD TRUMP DEPICTED ROMAN Editorial Stock Photo - Stock  Image | Shutterstock

    US PRESIDENT DONALD TRUMP DEPICTED ROMAN Editorial Stock Photo - Stock  Image | Shutterstock

    A float depicting US President Donald Trump was on display during a preview by the Mainzer Carnival Club in Mainz, Germany.

    Putin Isn't Reviving the USSR — He's Creating a Fascist State

    Wirtschaft is Economy.

    German Carnival parades defy weather, poke fun at powerful | AP News

    Of course, Americans also like the political floats:

    Driving in Macy's Thanksgiving Parade: Fun Facts You Never Knew

  20. Phil / BABA

    I have a few short Jan 2023 $200 calls. Should I roll them into short Jan 2024 $100 calls now or wait?

  21. Why DocuSign Shares Are Falling

  22. BABA/Jij – Jan $200 calls are just $1.50, so effectively dead.  I don't know what the rest of the position is or how it's covered.  Or do you mean puts?

  23. Recovering into the close but still a red day.


    VIX still over 30 so nothing is over

  24. BEKE -22.48%Mar. 10, 2022 2:40 PM ET

    • KE Holdings (BEKE -22.5%) Q4 shows net revenues increase of 14.6% Y/Y to RMB80.8B.
    • Number of stores was 51,038 as of December 31, 2021, a 8.7% increase from one year ago.
    • Number of active stores was 45,339 as of December 31, 2021, a 4.4% increase from one year ago.
    • Net loss in 2021 was RMB525M.
    • Mobile monthly active users averaged 37.4M compared to 48.2M last year.
    • Gross profit was RMB2.9B in Q4, compared to RMB5.4B in the same period of 2020.
    • Gross margin was 16.4% vs. 23.9% prior.
    • As of December 31, 2021, the combined balance of the company’s cash, cash equivalents, restricted cash and short-term investments amounted to RMB56.1B
    • Business Outlook: Q1 2022 Company expects total net revenues to be between RMB11.5B and RMB12.5B, representing a decrease of approximately 39.6% to 44.4% from the same quarter of 2021.

    • Previously (March 9): KE Holdings GAAP EPS of $0.95 beats by $1.01, revenue of $80.75B beats by $68.28B

    CSCO -2.24%Mar. 10, 2022 2:37 PM ET6 Comments

    Cisco (NASDAQ:CSCO) shares fell on Thursday as Wells Fargo downgraded the networking giant, noting shares could be range bound for some time.

    Analyst Aaron Rakers lowered the firm's rating to equal weight, noting that that although the firm is positive on its transition to a subscription model and gaining incremental webscale, shares are likely to stay in a range due to "limited multiple expansion" as investors focus on what could be a peaking backlog and product order growth.

    Cisco (CSCO) shares fell slightly more than 2% to $54.63 in mid-day trading on Thursday.

    There are also concerns that Cisco (CSCO) may have trouble generating more than 1.5 or 2 percentage points of incremental revenue growth, as its transformation to subscription model is well known and modeled.

    Lastly, even though Cisco (CSCO) is experiencing a "positive ongoing Cat9k upgrade cycle," there are some concerns that it could face increased competition from Arista (NYSE:ANET), HP's (NYSE:HPQ) Intelligent Edge and Juniper Networks (NYSE:JNPR) Mist + EX-series pull-through.

    In conjunction, Wells Fargo also upgraded Arista (ANET) to overweight with a $160 price target, noting it has a "more compelling risk / reward setup" than Cisco. In addition, Arista (ANET) looks "well positioned" for a strong hyperscale cloud upgrade cycle and there is the potential for revenue to grow more than expected given its "significant inventory + purchase commitment expansion."

    Arista (ANET) shares fell slightly less than 0.5% to $120.10 in premarket trading.

    Last month, Cisco (CSCO) and Rakuten (OTCPK:RKUNY) agreed on a strategic cooperation deal to build out solutions for 4G and 5G mobile networks based on Open Radio Access Network technology.

    Mar. 10, 2022 2:13 PM ET5 Comments

    • The U.S. government's deficit narrowed to $217B in February, according to the U.S. Treasury's monthly statement. This compares with $311B in Feb. 2021.
    • The government spent $506B in February, up from $346B in the prior month.
    • Government receipts were $290B in February vs. $465B in the previous month.
    • Note that February is the first full month of the annual individual tax filing season and broadly contains elevated tax refund levels, according to the report.
    • Earlier, consumer price inflation surged 7.9% in February, the biggest move in 40 years.

    SEAT -11.69%Mar. 10, 2022 2:10 PM ET

    Vivid Seats (SEAT -11.6%) fell on Thursday despite the company easily topping consensus estimates with its Q4 earnings report.

    The selling pressure could be tied to SEAT's guidance for 2022 revenue of $510.0M to $550.0M and adjusted EBITDA in the range of $110.0M to $115.0M, which Citi said fell below expectations.

    During the earnings call, Vivid Seats (NASDAQ:SEAT) execs noted that adjusted EBITDA and adjusted EBITDA margin declined sequentially due to significant amounts invested in the new brand. The company thinks the investments will continue to drive meaningful improvements in brand awareness and target markets, which it believes will generate meaningful long-term benefits. The guidance from Vivid Seats (SEAT) assumes that one quarter of the major league baseball season does not occur.

    Vivid Seats earnings call transcript.

    TSLA -3.32%Mar. 10, 2022 1:45 PM ET7 Comments

    Automobile stocks traded lower on Thursday following the failed high-level talks between Russia and Ukraine aimed at finding a compromise. Ford (F -2.0%), General Motors (GM -2.3%), Toyota (TM -0.8%), BMW (OTCPK:BMWYY -5.5%), Stellantis (STLA -7.2%), Mercedes-Benz Group AG (OTCPK:DDAIF -3.5%), Ferrari (RACE -3.0%), Tata Motors (TTM -1.7%) and Tesla (TSLA -5.3%) all fell.

    Investors are faced with pricing in an extended period of high commodity prices and inflation. Volkswagen CEO Herbert Diess added to the anxiety by warning that the fallout of a lengthy war between Ukraine and Russia risks being very much worse for Europe's economy than the impact caused by the pandemic, which is still being felt in the supply chain.

    On Wall Street, Piper Sandler kept an Overweight on Tesla (NASDAQ:TSLA), but warned that shareholders also need to factor in U.S-China relations as a wildcard.

    "Nickel prices are garnering particular attention, given their importance in battery manufacturing, but in our view, deteriorating U.S.-China relations are potentially more consequential in the long-term. Tesla’s China exposure is a major positive, but we must admit: If American companies are eventually used as pawns in a wider geopolitical conflict, then Tesla shareholders would likely suffer."

    AZN +0.20%Mar. 10, 2022 1:22 PM ET7 Comments

    • Although they are recommended every year in the fall, the CDC said that so far, the influenza vaccines created for the 2021/2022 season have not been that effective in preventing the virus.
    • A flu vaccine typically aims to fight four different virus variants. Before the start of each flu season, scientists use their best judgment as to what variants will be the most prevalent.
    • Based on data from 3,636 children, adolescents, and adults with acute respiratory infection from the beginning of October to mid-February, the CDC said that virus effectiveness was 16%, a figure not considered statistically significant.
    • As a result, "influenza vaccination did not significantly reduce the risk of outpatient medically attended illness with influenza A(H3N2) viruses that have predominated so far this season," researchers wrote in the MMWR.
    • GlaxoSmithKline (GSK -1.4%), Sanofi (SNY -1.2%), Seqirus, and AstraZeneca (AZN +0.2%) manufacture U.S. FDA-approved flu vaccines.

  25. KMB practically back to the pandemic low    $118.90 now 

  26. KMB a trader sells the 2024 $135 calls and the 2024 $105 puts 

  27. Bit of a falling knife at the moment.  

  28. Hate to sound like a conspiracy agent. Why is Ken Griffin's ( head of Citadel Hedge Fund) private Jet gong to a remote Airport in Finland near the Russian border three times recently? Money Laundering, Oligarch needs a lift ? Seems like a scene from Billions to me. 

  29. There's a lot of money to be made moving money around for people.  

    I know a guy who's a Receiver that moves funds from Off-Ledger Accounts to On-Ledger (legitimately) and it's stunning how much money is involved in these transactions.