Financial News vs. Noise

Yesterday’s big number was JOLTS, which was a miss. This helped buoy treasuries and we saw a quick knee jerk reaction in stocks, which quickly faded. At some juncture we hit an inflection point where slowing economic numbers are good for bonds, but not for stocks. Keep an eye on this correlation, it used to be that the 10yr would lead you to the direction of stocks, this may be changing. One would think this makes Friday’s NFP report even more important, but we have not seen any jump in volatility indicating that people are hedging.

Yesterday, as I suspected, we saw money flow back into the Magnificent 7, with META being the only name in the red. So far this morning, this is continuing but it’s real early. If the market continues in an uptrend then I like the idea of buying weakness in Mag 7 names.

I still like the precious metals here, you had to figure they needed to consolidate these gains, but they are holding support. Gold (GLD) is holding it’s 20 day EMA.

While the miners (GDX) hold the 200 day.

If there support areas fail then we would shift from bullish to bearish.

The move into “stuff” stocks that looked so promising never materialized. The only name I was in was AA luckily, which stopped me out. For now I am shifting to buying weakness in uptrends. In that regard, the steel stocks look like the most attractive area of the “stuff” stocks. In those going to be watching X. Was a big options trade betting on a 10% move in a week and as I said, I like the steel stocks in general, keeping with my theme of buying pullbacks in strength.

Speaking of options flow, starting to see it pick up in the pot stocks.

As far as the short squeeze names I alerted you to HOOD yesterday. Seeing the retail guys now moving to AI, problem is it has earnings after the close, so be careful.

C3.ai Earnings Are Just Ahead. Here’s What to Expect.-Barron’s

As far as other areas I will be watching today:

Emerging Markets—Starting to like these a lot. Currently own GGAL to get some exposure to Argentina, VALE to get exposure to metals and Brazil, and bought EEM yesterday. Speaking of emerging markets, we are going to be launching an ETF tomorrow that provides EM exposure but excludes Chinese stocks that make weapons that can be used against our troops. More information tomorrow, but this was timely:

The U.S. Can Afford a Bigger Military. We Just Can’t Build It. America’s industrial base struggles to ramp up defense production while China’s churns out ever more weapons-WSJ

Speaking of Argentina, not sure if this is a good thing or a bad thing.

‘El Loco’ Won the Argentina Election Last Month With Outlandish Ideas. Now He’s Backpedaling. Javier Milei, who pledged to kill the central bank, cut ties with China and slash public spending has taken a softer tone ahead of his inauguration-WSJ

Small Caps—No position but looking to buy dips.

Retail—Giving up trying to short them for now, if they want to move up will look to buy into any selloffs. Picked up some XRT yesterday.

Few other areas that could be interesting are uranium, transports, and regional banks.

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News vs. Noise

How Long Can the ‘Magnificent Seven’ Stocks Hold the Line? With portfolios concentrated in a handful of expensive stocks, a few company-specific outcomes could have seismic consequences-WSJ

That poses a conundrum for investors, who increasingly use index funds. Right now, buying an S&P 500 tracker means investing 30% of the money in just seven stocks. Historically, the top seven have accounted for 21% of the benchmark, taking the end-of-year average of the past decade.

I do think some of these issues like soft vs. hard landing and when the Fed will cut, and how much, are going to make things interesting to start the year. Did stock market rally too far, too fast? Surge may require some payback in early 2024, analyst says.-MarketWatch

Seeing a few brokers caution on the rally, which makes me more bullish. Blistering stock-market rally running out of gas with trend-following funds poised to slash exposure, Goldman warns-MarketWatch

Sitting on cash? Give it to us so we can earn fees. Sitting on cash? Stocks, bonds pay off more when Fed on ‘pause’ than in ‘easing periods,’ BlackRock says-MarketWatch

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