Financial News vs. Noise
Interesting week to say the least. On Wednesday Powell basically told the market not to expect a rate cut in March. Stocks sold off as you would expect, but interestingly rates also came down. This caused me to wonder if bond traders knew something that stock traders didn’t. Thursday the market recouped a lot of Thursday’s losses, perhaps the stock guys were smoking the same stuff the bond guys were? Then on Friday we had a hot jobs number, which should put the final nail in the coffin on any hopes of a March cut. Some mornings you just get a sense that traders come in wanting to buy, you got that sense Friday before jobs. Thursday night saw blowout earnings from META and AMZN and the markets were up prior to the number. Predictably, we saw SPY go green to red and we saw rates on the 10yr move back above 4%. Then the market turned around and blew through the highs. So I am again left asking, what do the bond guys know that the stock guys don’t? Was Friday’s hot jobs number the result of seasonal factors that will be revised down later?
We had a ton of data last week, and my overall sense is that data was bearish. So far only 2 out of the Magnificent 7 have had good earnings (based on market reaction), Powell was hawkish, and Jobs were a blowout. Breadth on Friday was awful, almost 2-1 negative. I ended up selling a bunch more equity exposure on Friday and kept my SPY puts unhedged as I think caution is warranted at the moment. At the moment rates are up again and futures are slightly in the red.
I continue to think you buy Mag 7 names on dips, and sell them on rallies. I still have a bit of TSLA, AMZN, and META but have taken down all my positioning a ton. One of my weekly mean reversion models also still owns some AAPL. AAPL and TSLA are the most interesting to me this week as they have been the laggards.
From a chart standpoint I would love to see AAPL break back above it’s 200 day.
On TSLA I would still like it to break back above 191.25, which is not happening so far this morning.
In the it’s better to be lucky than good category I sold all my gold miners on Thursday. If jobs was cool that would have looked pretty dumb. I am still out of GDX but I added a small position in GFI on Friday which had an undercut and rally at it’s 50 day. If rates continue to move up this probably won’t work out but I see it as a hedge if rates end up turning down hard.
Keep an eye on the regional banks. KRE was green on Friday, which could have been a gift for shorts. I did a webinar with Yang Tang on Friday about this. Below are the PowerPoint and a link to the video:
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