Financial News vs. Noise
In the News:
T-Rex Pushes Single-Stock ETFs to New Levels-ETF.com
Kind of a strange week. On the surface it looks like business as usual, stocks up and continuing to push towards the highs, rates down below 4%. The key data points, CPI and PPI, really didn’t move the market. Beneath the surface there are a lot of moving parts. CPI came in a bit hot, PPI a bit cold. The bears tried to sell it off, but the dips go bought. After broadening out a bit in breadth money flowed right back into the Magnificent 7 (except TSLA).
My weekly S&P model is now showing 79 names oversold (2 week RSI under 20), but the only Magnificent 7 name on the list is TSLA. (FWIW TSLT had a record volume day and we had inflows, I am not privy to the flow in the other TSLA single stock ETFs in real time). Woke up to red across the board, looks mostly China related. Only green at the moment is oil (just slightly) and pot. Do the bulls come in and buy the dip?
Looking at a daily chart of the S&P the dip got bought and we are right back near the December highs. That 4700 area looks like key support.
I know some people are starting to buy some puts for protection and that seems prudent (keep in mind I run a 0DTE strategy that most days has me in SPY puts overnight), but it seems like the better hedging action is going to be elsewhere.
Speaking of hedging, there was a massive call buy in VIX options on Friday. Someone bought about 250k February 14 17 calls.. They spent about $16.7M. The VIX hasn’t traded above 17 since early November and is currently at $12.70.
VIX trader drops US$17M on bet that eerie stock market calm won't last-BNN Bloomberg
Keep in mind that we have no idea who this is, what else is in their portfolio, while $17M is massive to me, it may be a rounding error for someone else. I do think if you are looking to hedge then calls on the VIX may be a better bet than SPY puts. Our VIX models got close a couple of times to going long last week but never got there. A couple of our short models did trigger on Friday and I will be adding some UVXY puts today. Keep in mind that the average hold time on our short VIX models are about 7-8 days, so not making a long term bet here.
Couple of things that stood out:
Airlines—Got crushed on Friday and JETS looks like a short here
I liked the short set up on RCL a bit better so I ended up taking that.
Oil stocks bounced a bit on Friday. Not show whether this is renewed Middle East tensions or something else, but I continue to be long.
The only name not working out for me is CVE, which I mentioned last week because of the option flow. Friday they also had a big insider buy. This one probably needs me to sell it to actually move up :)
Gold miners opened big on Friday but closed well off the highs. I sold my GDX near the highs as I just didn’t feel like the big rally was going to stick. I will be watching for a spot to re enter.
The banks kicked off earnings season and disappointed for the most part. I continue to think you play this by being short the regionals. I did take a short position intraday but decided not to carry it over the long weekend. Bunch of regionals report earnings this week so this will be a top watch on the short side.
On the long side, I did buy the dip in JP Morgan.
I kind of like the idea of long JPM, short regionals. Interesting that JPMs 2024 forecast assumes 6 rate cuts, does Jamie know something we don’t?
ARKK is interesting as these names benefit most from lower rates. Yet while traders bought the dip in the S&P, they sold it in ARKK names.
My sense here is that this may be another flight to safety Magnificent 7 rally, which is again why I say you ought to buy the dips in them.
The commodity names have been disappointing to start the year. I continue to think money will flow there and look for dip buys. Friday I added CLF, it’s an area I like, it held support, and it got an analyst upgrade.
China continues to disappoint. I did buy the dip in FXI.
This is likely to be important:
Taiwan Awaits Presidential Election Results as World Watches-WSJ
Crypto miners continued to get crushed. I do think there is going to be a massive dip buy opportunity if you are nimble enough to catch it.
Ideally would like to see MARA U&R at the 50 day.
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Matthew Tuttle is the Chief Executive Officer and Chief Investment Officer of Tuttle Capital Management, LLC.
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