Global Market Comments
January 17, 2025
Fiat Lux
Featured Trades:
(JANUARY 15 BIWEEKLY STRATEGY WEBINAR Q&A),
(GS), (MS), (JPM), (C), (BAC), (TSLA), (HOOD), (COIN), (NVDA), (MUB), (TLT), (JPM), (HD), (LOW), FXI)
Posts
Below please find subscribers’ Q&A for the January 15 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Sarasota, Florida.
Q: What would I recommend right now for my top five stocks?
A: That’s easy. Goldman Sachs (GS), Morgan Stanley (MS), JP Morgan (JPM), Citibank (C), and Bank of America (BAC). There's five right there—the top five financials that are coming out of a decade-long undervaluation. A lot of the regional banks, which are also viable, are still trading to discount the book value, which all the financials used to trade out only a couple of years ago. Of course, JP Morgan's reaching a two-year return of around double, but the news just keeps getting better and better, so buy the dips. Buy every sell-off in financials and you will be a happy camper for the year.
Q: What do you think about Robin Hood (HOOD)?
A: Well, the trouble with Robinhood is it’s very highly dependent on crypto volumes. If you think crypto is going to go higher and volumes will increase, this is a great play. However, you get another 95%, out-of-the-blue selloff in crypto like we had three years ago and Coinbase (COIN) will follow it right back down again. On the last downturn, there were concerns that Coinbase would go under, so if you can hack the volatility, take a shot, but not with my money. I have the largest banks in the country that are about to double again; I would much rather be buying LEAPS in that area and getting anywhere from 100% to 1000% percent returns on a 2-year view—much more attractive risk-reward for me. And they pay a dividend.
Q: How do you define a 5% correction?
A: Well, if you have a $100 stock and it drops $5, that is a 5% correction.
Q: Can you please explain what Tesla 2X leverage actually means and is it a way to trade Tesla as an alternative?
A: I steer people away from the 2Xs because the tracking error is really quite poor. You only get 1.5% of the upside, but 2.5 times the downside over time. These are more day trading vehicles. They take out huge fees, and huge dealing spreads—it's a very expensive way to trade. Far cheaper is just to buy Tesla (TSLA) stock on margin at 2 to 1, and there your tracking error is perfect, your fees are much lower, and you just have the margin interest rate to pay on the position, which is 6% a year or 50 basis points a month. No reason to make the ETF people richer than they already are. They keep coining these products—1x, 2x, 3x long shorts on every one of the high volume stocks, and it sucks a lot of people in, but it's higher risk, lower returns for the amount of money you're risking as far as I'm concerned. So that's the way to do it.
Q: What are your projections for Nvidia (NVDA)?
A: I think not just Nvidia, but all of the big tech is going to be kind of trading in a sideways range for a while, maybe 6 months, and then we get an upside breakout if you get the earnings breakout, which we are all expecting. AI is still in business, and still growing gangbusters. There are always a lot of Cassandra's out there saying that we're going to crash anytime, and I just don't see it. I know a lot of these people, I'm in touch with a lot of the companies, I see Beta releases of all products, the consumer products, and…the slowdown just ain't happening, I'm sorry. And I've been through a lot of these tech booms over the last 40 years, and this is only showing signs of just getting started.
Q: How come Tesla (TSLA) is up and down $30 every couple of days?
A: Number one, it is the most actively traded stock in the market right now. It has implied volatility on the options of 70%, which is really the highest in the market of any individual stock. That just creates immense amounts of trading by options traders, volatility traders, by call writing, and 2x and 3x ETF long and short players. All of the financial engineering and new products that we see all gravitate toward the high volume stocks like Nvidia, Tesla, and Apple because that's where the money is being made. Some days Tesla accounts for 25% of all the market trading. Financial engineers go where the action is, where the volume is, where the customer demand is.
Q: Why do you expect only 5% to 10% corrections if the Fed rate cuts get completely priced out?
A: I don't expect the Fed to keep cutting interest rates. We should get another rate cut this year, and that may be it for the year. If inflation comes back (and of course, all of the new administration’s policies are highly inflationary) it’s just a question of how long it takes for it to hit the system.
Q: Do you believe I should hold all of my municipal bonds (MUB) with 10-year call protection at 4.75%?
A: On a tax-adjusted basis, I would say yes. You know, stock markets may peak and deliver a zero return, and in that situation, muni bonds are very attractive. The nice thing about bonds is that you hold on to maturity—you get 100% of your money back. With stocks, that is not always the case. Stocks you have to trade because the volatility can be tremendous. And in fact, what I do is I keep all of my money in one year Treasury bills. Last time I did this, which was in September, I locked in a one-year return for 5%.
Q: Would you prefer to buy deep in the money and put spreads on top of any rally?
A: Absolutely yes. If this is a real trading year, you not only buy the dips, you sell the rallies. We did almost no real selling last year. We really only did it in June and July because the market essentially went straight up, except for two hickeys. This could be the year of not only call sprints but put spreads as well. You just have to remember to sit down when the music stops playing.
Q: You say buy the dips; what would your dip be in JP Morgan (JPM)?
A: Well lower volatility stocks by definition have smaller drawdowns. JP Morgan (JPM) is one of those, so I'd be very happy to buy a 5% dip in JP Morgan. If it drops more, you double the position on a 10% pullback. Higher volatility stocks like Tesla—I'm really waiting for 10% or 20% corrections. You saw I just bought a 22% correction twice in Tesla with it down 110 points. One of those trades is at max profit right now and the other one has probably made half its money since yesterday. That is the game. The amount of dip you buy is directly related to the volatility of the stock.
Q: Should you let your cash go uninvested?
A: Yes, never let your cash go uninvested just sitting as cash. Your broker will take that money and put it in 90-day T-bills and keep the money for himself. So buy 90-day T-bills as a cash management tool—they're paying about 4.21% right now— and you can always use those as collateral under my positions on margin.
Q: Is Home Depot (HD) a buy on the LA reconstruction story?
A: I would say no, Los Angeles is probably no more than 5% of Home Depot's business—the same with Lowe's (LOW). A single city disaster is not enough to move the stock for more than a few days, and the fact is: Home Depot is mostly dependent on home renovation, which tends not to happen during dead real estate markets because, you know, it takes the flippers out of the market. It really needs lower interest rates to get Home Depot back up to new highs.
Q: Do you expect a big market move at the end of the day when the Fed makes its announcement?
A: The market has basically fully discounted the move on January 28, and if anything happens, there'll probably be a “sell on the news.” So, I expect we could give up a piece of the recent performance on the announcement of the Fed news.
Q: Should we expect trade alerts for LEAPS coming from you?
A: Absolutely, yes. However, LEAPS are something you really only want to do on down moves. If we don't get any, we'll just do the front-month call spreads. You can still make 10%, 20% a month just concentrating on financial call spreads.
Q: What would have happened to our accounts if we kept the (TLT) $82-$85 iShares 20+ Year Treasury Bond ETF (TLT) call spread and it went all the way down to $82?
A: The value of your investment goes to zero. Of course, it was declining at a very slow rate, and the $80: you might have gotten a bounce off the $85 level. But if the inflation number had come in hot, as had all other economic data of the last month, then you could have easily gotten a gap down to $82 and lost your entire investment, because two days is not enough time to expiration to recover that 3-point loss. And that's why I stopped out yesterday.
Q: Didn't David Tepper buy China (FXI)?
A: With both hands last September, yes he did. And my bet is he got out before he got killed. I mean, that's what hedge funds do. He probably got out close to cost, and you likely won't see him promoting China again anytime in the near future.
Q: I have June 530 puts on the S&P 500, should I get rid of them?
A: Yes, I don't see a big crash coming. You probably paid a lot going all the way out to June, and it's probably not worth hanging on to. Put spreads are the better way to go—that cuts your cost by two-thirds and those you only want to put on at market tops.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, click on GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or JACQUIE'S POST, then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Good Trading,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
Global Market Comments
February 23, 2024
Fiat Lux
Featured Trade:
(FEBRUARY 21 BIWEEKLY STRATEGY WEBINAR Q&A),
(FXI), (SMCI), (PANW), (TSLA), (NVDA), (XLF),
(CCI), (XOM), (FANG), (AMD), (HD), (LOW)
Below please find subscribers’ Q&A for the February 21 Mad Hedge Fund Trader Global Strategy Webinar, broadcast from Silicon Valley, CA.
Q: What do you think of the comments of Ray Dalio and Jamie Dimon of an imminent war with Russia and China?
A: I think the chances of that are almost zero. You’re talking about Russia with a $1 trillion economy going to war against a combined GDP of the US and Europe of $50 trillion. Even Switzerland is sending tanks to Ukraine now. Our military is so dominant compared to any other country in the world, that it would be an instant wipeout. Russia and China know that, so they can threaten all they want but will take no action. That really has been the course since the end of WWII; talk is cheap. However, it is not a zero risk—a person like Ray Dalio, especially, always has to consider the 1% risk (Jamie Dimon less so.) I don’t worry about that at all; a lot of that is media hype. Newspapers have to fill their space every day of the year, even when nothing is happening.
Q: What about Russia putting nuclear weapons in space?
A: The US actually looked at doing this in the 60s and 70s when I was with the Atomic Energy Commission, and this is the problem: Uranium weighs four times that of lead, and it’s very hard to get any serious weight into space. And Russia has never been able to actually hit anything it aims at, so other than destroying a bunch of nearby Starlink satellites, it wouldn’t really accomplish much. Plus, we do have a treaty with Russia not to put nuclear weapons in space—not that agreements between the US and Russia are particularly trustworthy these days.
Q: Would you sell naked Nvidia (NVDA) puts right now?
A: Dan, somehow you got into my personal trading account and looked at all my positions! You know, I never advise people to sell naked puts unless they're happy to own the stock at that level. That means, first of all, you cannot leverage at all—the way people go bust on short put strategies is they sell far more puts than they have the money to support the cash buy if they have to do it. But I can tell you, I looked at the numbers this morning: if you sell short an Nvidia put now at 600 you can get about $10 for it. And, if Nvidia goes below 600 by option expiration day, you own Nvidia stock at a cost of $590. And I'm happy to own Nvidia at $590 because I think it could be worth $1,000 by yearend. There may be better ways to use your money with Nvidia at $600, like doing an at-the-money LEAPS which will get you a 100% return in a year even on no move. If you want to go, say, $40 out of the money or $50, like a 650-$650 Nvidia LEAPS, then you're looking at it with a 150% return in a year. So that is the better way to do it, it just depends on how aggressive you want to be and how eager you are to go back to work at Taco Bell if you lose all your money.
Q: What would you do with Super Micro Computer Inc. (SMCI) right now?
A: I would sell it, but then I would’ve sold it on the first 23x move. (SMCI) is a no-touch right now—I think they have a 3% float in their shares, and that’s what’s causing the spectacular market volatility.
Q: Will continued weakness in China (FXI) bring down the US markets?
A: No. We have very few investors from China in the US stock market. They really have no impact on our market. And the fundamentals couldn't be more different. You know, the US economy is in great shape right now (and getting better, I might add), while China continues to go down the toilet and is saber-rattling and warmongering. So, it's not good for stock prices for sure. You could put that at the bottom of the list of worries.
Q: Will Tesla (TSLA) ever turn around?
A: Well what you don’t know if you don't follow the company on a daily basis like I do, is that Tesla is continuously cutting costs, and increasing performance, and that will lead to greater sales and greater profits. But when that happens, I have no idea. I think the Tesla 2 coming out next year—the $25,000 EV could be a big turning point for the company. And of course, Tesla stock may front-run that by six months. So eventually, Tesla will come back.
Q: Thanks for your advice. I have a ton of Nvidia (NVDA) and some Tesla (TSLA). Should I sell my Tesla and put it in Nvidia?
A: No, you should do the opposite. Buy low, sell high—it’s my revolutionary new stock trading system which I’m thinking of copywriting. Nvidia has had one of the biggest stock gains in history, and Tesla is down year-on-year. So, that is the trade, and that is what a lot of long-term investors are doing, is doing that swap.
Q: Can we do a LEAPS on Palo Alto Networks (PANW)?
A: Absolutely. Wait for this selloff to finish, then go in at the money one year out and you should get a 100% or a double on your return. And by the way, when I’m convinced that tech stocks have finished this selloff, I’ll be issuing a whole bunch of LEAPS trade alerts. I’ll do the numbers and do the heavy lifting for you.
Q: Can Ukraine win the war against Russia without US aid?
A: No, in fact, it needs aid from both the US and Europe. Right now, Europe is carrying 100% of the burden, as the US has stopped providing aid to Ukraine, thanks to the Republican-led House of Representatives. And Ukraine is now ceding cities to Russia because they don’t have the ammunition or the missiles to defend them. So, give as much ammo as we can. Otherwise, it’s just a matter of time before US soldiers get involved in a European war once again. How the Republicans see cutting off as in America’s benefit, I can’t imagine, nor do many Republicans. They must be reading different news sources. But I’m also prejudiced on this, having been shot by Russians in Ukraine in October. (Those injuries are all healed by the way thanks to a stem cell injection and I’m back to hiking as usual.)
Q: When you say buy on dips, do you have a rule of thumb on what percentage a stock has to drop in order to consider it a dip?
A: It’s different for every stock because every stock has a different volatility. “Buy on the dip” might be a 5% for Cleveland Cliffs but it might be 20% for Nvidia. It’s all over the map—you just have to look at the charts and judge where the next support level is, before considering risking your own money.
Q: What’s your favorite dividend stock?
A: Well my Number One favorite, of course, is Crown Castle International (CCI)—the cellphone tower REIT—and REITS of any kind are going to be very high-yield and very attractive. Just stay away from the commercial office REITS, which are having their own well-publicized problems. Beyond that, the only attractive high dividend stocks are in energy: you have Exxon Mobil (XOM) yielding 3.7% and Diamondback Energy with the lovely ticker symbol of (FANG) yielding 4.48%. On the oils, you get a shot for not only the dividend but a nice capital gain on any recovery in the oil market. So that could be an attractive play once we finish bombing the Houthis and wiping out all their Iran-supplied missiles.
Q: What happened to the Japanese yen rally?
A: Well as with all other foreign currencies, it died and went to Heaven, because of the delay in US interest rate cuts. As long as the US doesn't cut interest rates, it will continue to have the strongest currency in the world. And when we get to the currency charts, you'll see exactly how strong the dollar has been. That does make the currencies very attractive right around here.
Q: Will commercial real estate blow up the banks, and therefore the stock market?
A: No, first of all, for big banks (XLF), commercial real estate is only 5% of their loan portfolio and if they lose 20% of that, that’s only a 1% loss of their total loans year for them and that is totally acceptable by in their business model. Second, if interest rates fall, the commercial real estate problem goes away because they can refinance at lower rates than you get now. Third, as the economy recovers, demand for office space will also recover, though it may take 5 years to soak up all the excess inventory that we have right now. San Francisco has an empty office space rate of about 30%, which is higher than it’s ever been. That is why a lot of smart, long-term real estate money is buying up buildings in San Francisco— they're buying them up for pennies on the dollar, so that sounds like a great investment. I remember back in the early eighties, Morgan Stanley did exactly the same thing in Houston after an oil collapse. You know, they were giving away office buildings—paying you to take them away, literally—and Morgan Stanley set up an in-house partner fund (it was only open for the partners from Morgan Stanley to invest in) and we went in and bought 600 million dollar’s worth of cheap Houston real estate. I think we ended up getting a 10x return on that, but that's what being a Morgan Stanley partner is all about. That was about 45 years ago, and it’s what’s happening now in San Francisco.
Q: Are you worried about Amazon (AMZN) with Jeff Bezos selling 8 billion dollars worth of stock?
A: Well, if you've made a couple of $100 billion you're allowed to spend $8 billion on yourself. And Amazon is one of the early leaders in AI technology, so I'm buying that on every dip. In fact, we had a long position in Amazon that just expired on Friday.
Q: Why is Home Depot Inc. (HD) stagnating?
A: Well that's easy: during the pandemic, everyone was stuck at home 24 hours a day, 7 days a week, so they wanted to fix stuff. With the end of the pandemic, that has ended and has slowed down business at both Home Depot and Lowes (LOW).
Q: Do you like Advanced Micro Devices (AMD) and would you buy it on a dip?
A: Absolutely, it’s all part of the same AI trade, as are all the other big chip stocks.
To watch a replay of this webinar with all the charts, bells, whistles, and classic rock music, just log in to www.madhedgefundtrader.com, go to MY ACCOUNT, select your subscription (GLOBAL TRADING DISPATCH, TECHNOLOGY LETTER, or Jacquie's Post), then WEBINARS, and all the webinars from the last 12 years are there in all their glory.
Good Luck and Stay Healthy,
John Thomas
CEO & Publisher
The Diary of a Mad Hedge Fund Trader
At our weekly Monday staff meeting, coworkers were griping and grimacing about their failed internet connections and annoying glitches to their favorite e-commerce sites during the mad rush to find the best deal during Black Friday and Cyber Monday.
Internet traffic was that torrential when sites were driven offline for minutes and some, hours by a bombardment of gleeful shoppers hoping to splash their credit card numbers all over the web on sweet discounts.
The crashing of system servers epitomizes the robust transition to online commerce that has most of us pinned to our devices surfing our go-to platforms all day long.
According to data from Adobe (ADBE) analytics, Black Friday sales jumped 23.6% YOY to $6.22 billion, and it was the first time in history that mobile sales broke the $2 billion threshold.
It is a clear victory for e-commerce and, in particular, mobile shopping that has become more integrated into modern tech DNA.
Mobile sales comprised 33.5% of total sales and were up from 29.1% last year, signaling that more is yet to come from this transcending movement that is shoving everything from content, digital ads, entertainment, banking and pretty much everything you can think of to your handheld smartphone.
CEO of Kohl’s (KSS) Michelle Gass confirmed the e-commerce strength by saying, “80 percent of traffic online came from mobile devices.”
The beauty of this movement is that it’s not an “Amazon (AMZN) takes all” scenario with other players allowed to feast on a growing size of the e-commerce pie.
“Click and collect” has been a strategy that has paid off handsomely with sales up 73% YOY during the shopping holidays.
This all supports my prior claim that e-commerce is one of the most innovative and dynamic parts of technology especially the grocery space, and the buckets full of capital attempting to reconfigure the e-commerce spectrum is creating an enhanced customer experience for the final buyer resulting in better products, superior delivery methods, and cheaper prices.
Some other retailers spicing up their e-commerce strategy are dinosaur big-box retailer’s intent to defend their business from the Amazon death star.
If you can’t innovate in-house, then “borrow” the innovation from somewhere else.
That is exactly what Target (TGT) has chosen to do announcing last week that it would grant free 2-day shipping with no minimum sale threshold.
The tactic is bent on undercutting Walmart (WMT) who currently operate a 2-day free shipping policy with a minimum order of $35.
Most shoppers will buy in bulk easily eclipsing the $35 per order mark minimizing the rot of small orders.
And if they aren’t eclipsing the $35 per order mark, it demonstrates the firm’s offerings lack the diversity and quality to compete with Amazon.
Capturing the incremental sale squarely rests on the e-tailers ability to coax out the buyers’ impulses to move on the can’t-miss items.
The lesser known retailers fail miserably at matching the lineup of products that Amazon can roll out.
The bountiful product selection at Amazon leads customers to pay for 3, 4, 5, 6 or more items on Amazon.com.
That said, I am bullish on Walmart’s e-commerce strategy. The “click and collect” strategy has shown to be an outsized winner increasing industry sales of this type 120% YOY.
Walmart is at the center of this strategy and they are refurbishing their supercenters to accommodate this growth in collecting from the curb.
Effectively, this gives customers the option to skip the queue instead of bracing the hoards and navigating the crowds of shoppers in the supercenter.
Other changes are minor but will help, such as offering online product location maps to customers beforehand and allowing customers to pay for large items like big-screen televisions on the spot.
The biggest windfall is derived from the cataclysmic demise of Toy “R” Us, giving Walmart a new foothold into the toy business.
Walmart is beefing up toy items by 40% in the stores and layering that addition with another 30% increase in their e-commerce division.
Adobe’s upper management recently said in an interview that interactive toys have been a wildly popular theme this year amid a backdrop of the best holiday shopping season ever recorded.
Another attractive gift selling like hotcakes are video games, titles boding well for sales at Activision (ATVI), EA Sport (EA), and Take-Two Interactive (TTWO).
Reliant IT infrastructure will be a key component to executing these holiday sales bonanzas.
Clothing retailer J. Crew and home improvement chain Lowe's (LOW) were grappling with sudden disruptions to their IT systems before they managed to get back online.
More than 75 million shoppers parade the internet to shop during Black Friday and Cyber Monday, and the opportunity cost swallowed to a tech glitch is a CEO’s worst nightmare.
Ultimately, what does this all mean?
Focusing on the positive side of the surging holiday sales is the right thing to do because the avalanche of momentum will have a knock-on effect on the rest of the economy.
Certain companies are positioned to harvest the benefits more than others.
Amazon guided its 4th quarter estimates conservatively and is in-line to beat top and bottom line forecasts.
Other pockets of strength are Walmart’s tech pivot, albeit from a low base. Walmart still has more room to maneuver and they are in the 2nd inning of their tech transformation snatching the low-hanging fruit for now.
Another interesting e-commerce company swinging its elbows around is Etsy (ETSY).
They sell vintage and handmade craft adding the personalized touch that Amazon can’t destroy.
Margins will be higher than the typical low-cost, value e-commerce platform, but scaling this type of business will be more difficult.
Sales grew 41% sequentially and just in time for a winter holiday blowout.
Etsy became profitable in 2017 after three straight loss-making years, and 2018 is poised to become its best year ever.
The profitability bug is hitting Etsy at the perfect time with its EPS growth rate up 36% sequentially.
They report at the end of February and I expect them to smash all estimates.
There are some deep ramifications for the long term of e-commerce that is beginning to suss itself out.
For one, shipping times will continue to be slashed with a machete. If you are enjoying the 2-day free shipping from Amazon and Target now, then wait until 2-day becomes 1-day free shipping.
Then after 1-day free shipping, customers will get 10-hour shipping, and this won’t stop until goods are shipped to the customer’s door in less than 1-hour or less.
This is what the massive $50 billion in logistical investments over the next five years by the likes of Uber and Amazon are telling us.
It will take years for the efficiencies to come to fruition, but it is certainly in the works.
In the next five years, America’s logistics infrastructure will have to accommodate the doubling of e-commerce packages from 2 billion to 4 billion per year.
Another trend is that omnichannel offerings are sticking and won’t go away anytime soon.
It was once premised that online sales would destroy brick and mortar, yet moving forward, a mix of different sales channels will be the most efficient way of moving goods in the future.
Pop-up stores have been an intriguing phenomenon of late, and surprisingly, 60% of consumers still require interaction with the product to be convinced it's worthy of buying.
Certain products such as fashionable dresses and designer shoes must be given a whirl before a decision can be made. This won’t change anytime soon.
The timing of the sales and marketing push has been moved forward as competitors are eager to get a jump on one another.
Management is agnostic to the timing of the sale.
Thus, discounted sales will show up a week before Thanksgiving as pre-Thanksgiving sales in the future elongating the holiday shopping season cycle by starting it early and delaying the finish of it.
Lastly, the record numbers prove that the e-commerce renaissance and the pivot to mobile is not just a flash in the plan.
What does this mean for tech equities?
The temporal tech sell-off of late is largely a result of outside macro forces and is not indicative of the overall health of the tech sector that has experienced record earnings.
If the markets can keep its head above the February lows, it sets up an intriguing December fueled by Americans flashing their digital wallets on online platforms.
Global Market Comments
September 24, 2018
Fiat Lux
Featured Trade:
(THE MARKET OUTLOOK FOR THE WEEK AHEAD, or IT’S FED WEEK),
(SPY), (XLI), (XLV), (XLP), (XLY), (HD), (LOW), (GS), (MS), (TLT),
(UUP), (FXE), (FCX), (EEM), (VIX), (VXX), (UPS), (TGT)
(TEN TIPS FOR SURVIVING A DAY OFF WITH ME)
20/20 hindsight is a wonderful thing, especially when all of your predictions come true.
In February, I announced that markets would trade in broad ranges until the run-up to the midterm elections. That is what has happened to a tee, with the decisive upside breakout taking place last week. From here on. You’re trying to buy dips for a year-end run-up to higher highs.
For many months I was the sole voice in the darkness crying out that the bull market was still alive, it was just resting. Now quality laggards are taking the lead, such as in Industrials (XLI), Health Care (XLV), Consumer Staples (XLP), and Consumer Discretionary (XLY).
Home Depot (HD), which I recommended a month ago has taken off for the races, as has competitor Lowes (LOW), thanks to a twin hurricane boost. Even the long dead banks have recently showed a pulse (MS), (GS).
Technology stocks are taking a long-needed rest after a torrid two-and-a-half-year run. But they’ll be back. They always come back.
It’s not only stocks that have broken out of ranges, so has the bond market (TLT), the U.S. dollar (UUP), and foreign currencies (FXE). Will commodity companies like Freeport-McMoRan (FCX) and emerging markets (EEM) be the last to pick themselves off the mat, or do they really need to see the end of the trade wars first?
Markets are essentially acting like the trade war is over and we won. Why would traders believe this? That’s what a Volatility Index touching $11 tells you and is why I have been telling them to avoid buying it all week. Because the president told them so.
Another not insignificant positive is that multinationals have been slow to repatriate foreign funds, so there is a lot more still abroad to buy back their own stocks.
Weekly jobless claims hit another half century low at 201,000. Major U.S. companies such as UPS (UPS) and Target (TGT) are planning record levels of Christmas hiring. By the way, this is what economic peaks look like.
The Senate passes a mini spending bill that keeps the government from shutting down until December 7. The budget deficit keeps on soaring, but apparently, I am the only one who cares. Live through a debt crisis like we had during the early 1980s and you’d feel the same way.
The data for housing continues to be terrible, and we saw our first increase in inventories in three years.
Finally, with people camping out overnight and lines around the block, Apple’s CEO Tim Cook opens the doors to the Palo Alto, CA, store at 9:00 AM sharp on Friday to three new phones. But did the stock peak at $230, as it has in past release cycles?
Last week, the performance of the Mad Hedge Fund Trader Alert Service forged a new all-time high and then gave it up on one bad trade. September is now unchanged at -0.32%. My 2018 year-to-date performance has retreated to 26.69%, and my trailing one-year return stands at 38.23%.
My nine-year return appreciated to 303.16%. The average annualized Return stands at 34.32%. I hope you all feel like you’re getting your money’s worth.
This coming week is all about the Fed, plus a plethora of housing data.
On Monday, September 24, at 10:30 AM, we learn the August Dallas Fed Manufacturing Survey.
On Tuesday, September 25, at 9:00 AM, the new S&P Corelogic Case-Shiller National Home Price Index for July, a three-month lagging indicator.
On Wednesday September 26, at 10:00 AM, the August New Home Sales is published. At 2:00 the Fed Open Market Committee announced its decision to raise interest rates by 25 basis points.
Thursday, September 27 leads with the Weekly Jobless Claims at 8:30 AM EST, which dropped 3,000 last week to 201,000, a new 43-year low. At the same time an update on Q2 GDP is published.
On Friday, September 28, at 9:45 AM, we learn the August Chicago Purchasing Managers Index. The Baker Hughes Rig Count is announced at 1:00 PM EST.
As for me,
Good luck and good trading.
